Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PETITION

Sand Quarrying, Congleton

Sir A. V. Harvey: Mr. Speaker, I beg leave to present to this House a Petition from the people of Congleton. The Petition has been signed by 5,647 residents of Congleton, and is backed by the borough council, which has previously tried to interview the Minister on this subject.
Congleton is an old and important Cheshire town. A new survey would show that sand of equal quality is obtainable in many other parts of the country where quarrying would not be so harmful. The position is very serious, for unless a halt is called now the town will be entirely ringed by sand quarries.
Wherefore your
Petitioners pray that a ban be imposed on further sand quarrying in Congleton which has already contributed more than its fair share and is in danger of being completely ruined as a once picturesque Cheshire town and attractive residential area. Many cherished footpaths have already disappeared, beautiful scenery has been ruined, discomfort and damage to health result from sand blowing and noise of machinery.
And your Petitioners, as in duty bound, will ever pray.

To lie upon the Table.

Oral Answers to Questions — BOARD OF TRADE

Hotel Industry

Mr. Blaker: asked the President of the Board of Trade whether he will take steps to encourage investment in the hotel industry in places outside London.

The Minister of State, Board of Trade (Mr, J. P. W. Mallalieu): I am consider-

ing recommendations for encouraging investment in hotels generally which have been submitted by the Economic Development Committee for Hotels and Catering.

Mr. Blaker: Is the Minister of State aware that that news, so far as it goes, will be welcomed? Is he aware that if devaluation is to have the effect of bringing more foreign visitors here and persuading more British people to spend their holidays in Britain, we shall need very many more hotel beds? Is he aware that the existing hotel loan scheme is not a success, and will he replace it with something better?

Mr. Mallalieu: I am very conscious of the points the hon. Member has mentioned. We are reviewing the existing hotel loan scheme to see how it has gone, and are considering whether it should be extended or altered.

Dr. John Dunwoody: In view of devaluation our need to earn foreign currency, and the problems of the development areas, will my hon. Friend see whether he can take additional steps to attract foreign tourists to resorts in the development areas?

Mr. Mallalieu: Grants for building hotels in development areas are already available under the Local Employment Acts.

Mr. Patrick Jenkin: Is not this now the time to relieve the tourist industry of the Selective Employment Tax?

Mr. Mallalieu: That is a matter that the hon. Member had better put to my right hon. Friend.

Holiday-in-Britain Campaign

Mr. Blaker: asked the President of the Board of Trade whether he is satisfied that the sum of £300,000 recently granted by Her Majesty's Government to the British Travel Association for encouraging United Kingdom residents to take their holidays in Britain is adequate; and if he will make a statement.

Mr. J. P. W. Mallalieu: The "Holiday-in-Britain" campaign, which is estimated to cost £343,000 this year, was drawn up by a professional agency on the basis of market research and in full consultation with the British Travel Association. I believe that it will be effective.

Mr. Blaker: Is the Minister aware that while publicity by the British Travel Association is usually very well done and is no doubt useful, what is required, with respect to my hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin), is not merely the abolition of the Selective Employment Tax, but the complete recasting of the Government's tax system so far as it affects the hotel and catering industry?

Mr. Mallalieu: The whole business of investment grants, and so on, for hotels is being looked at now.

Mr. Rees-Davies: Surely the Minister recognises now that that loan of £5 million was a failure; and that if we are to take advantage of this campign by the B.T.A. it is absolutely essential that the small person in the provinces running an hotel should take advantage of these small loans and grants? Will he see to it that his right hon. Friend the President of the Board of Trade understands that problem, and goes forward to deal with it?

Mr. Mallalieu: That problem is now fully understood, and if the scheme is extended it will be taken care of.

Sir K. Joseph: The Minister of State is giving the House very neutral replies about these matters. Can we take it that he, as Minister responsible for tourism, is ardently advocating the removal of S.E.T. by the Chancellor of the Exchequer from the hotel industry, and the provision of some sort of investment grant for the industry?

Mr. Mallalieu: We make whatever representations we think are appropriate.

North Atlantic Passenger Liner Trade

Mr. Wingfield Digby: asked the President of the Board of Trade what study he has made of the problems of the North Atlantic passenger liner trade with a view to retaining a reasonable proportion of it for Great Britain.

Mr. J. P. W. Mallalieu: This is primarily a commercial matter, but the hon. Member will be aware that the Government are increasing the size of the loan which they will be making to Cunard.

Mr. Digby: Is it not a fact that, despite the increase in air travel, the number of

passengers travelling by sea is approximately the same as it was in 1950? Is it not therefore important, both from the the point of the prestige of our Merchant Navy and from the point of view of our own currency, that we should try to retain our position in this respect?

Mr. Mallalieu: I cannot question the figures for 1950, but from 1955 to the present day the number of passengers travelling by sea has fallen sharply. I agree with the hon. Member that it is important to do what we can in this respect.

Stansted Airport

Mr. Boston: asked the President of the Board of Trade what representations he has considered from the Greater London Council for a new inquiry into the proposal to site the third London airport at Stansted; and what reply he has given.

The President of the Board of Trade (Mr. Anthony Crosland): I have received a resolution to this effect from the Greater London Council. The Government have, however, as already announced, confirmed the Stansted decision, while considering the possibility of realigning the runways to reduce disturbance from aircraft noise.

Mr. Boston: Will my right hon. Friend accept that a great many people will be very relieved by that reassuring news? Will he confirm that he will continue to resist any demands for further inquiries, because there have been quite sufficient into this matter already? Will he give any indication of when the development order is likely to be introduced?

Mr. Crosland: I am also relieved by the first remark in my hon. Friend's supplementary question. As to the remainder of it, there will not be a public inquiry into this matter. As to the development order, I cannot give a date because that depends on when discussions with the local authorities are concluded.

Mr. Corfield: Will the right hon. Gentleman bear in mind that, in the light of the inspector's report, by making this decision, he has utterly undermined public confidence in the whole of the inquiry system and has failed to carry with him either the public or expert opinion in the


aviation world with regard to the right site?

Mr. Crosland: This decision has been examined and argued about for not merely months but a matter of years. I re-examined it when I went to the Board of Trade at the beginning of September and satisfied myself again that Stansted is the best site. If we were to reopen the matter now it would cause a very considerable risk of delay in our building the third London airport, with serious consequences to our economy and balance of payments.

Mr. A. Royle: In view of the decision to spend public money inquiring into the realignment of runways at Stansted, will the right hon. Gentleman also consider realignment of runways at Heathrow? This would relieve the nuisance of noise caused for many London residents?

Mr. Crosland: That is another question. As the hon. Member knows, I am concerned about the problem of noise at London Airport. On the realignment of the runway at Stansted, the Government have been willing to incur an additional cost which may rise to £10 million in order greatly to reduce the noise and the threat to amenity in the Stansted area.

Mr. Goodhew: Surely this saving of £10 million on the existing runway at Stansted was the one reason for using the Stansted site? That being so, surely the right hon. Gentleman is willing to look at the matter again?

Mr. Crosland: The hon. Member is wholly misinformed about this. It was never the sole reason for choosing Stansted, as was made perfectly clear in the White Paper and in public discussions on the matter. There were many other powerful reasons argued in the White Paper for choosing the Stansted site.

Mr. Biggs-Davison: On a point of order—

Mr. A. Royle: On a point of order—

Mr. Speaker: Order. One point of order at a time. Mr. Biggs-Davison.

Mr. Biggs-Davison: On a point of order. In view of the unsatisfactory nature of the reply, deeply injurious to my constituents—

Mr. Speaker: Order. Notice must be given in the conventional way.

Mr. Biggs-Davison: I beg to give notice that I will raise the matter on the Adjournment.

Insurance Premiums (Increases)

Mr. Doig: asked the President of the Board of Trade why he agreed to allow increases of 150 per cent. on small insurance premiums by insurance companies, in view of the Government's prices and incomes policy.

The Minister of State, Board of Trade (Mr. George Darling): The Government have agreed that small premiums, not large enough to cover costs, could be increased. I understand that in most cases insurers offer to increase the sum insured in proportion to the increase in the premium.

Mr. Doig: Is the Minister not aware that the reply he has given and the reply he gave to me in a letter suggest that these insurance companies must be totally incompetent to take premiums which will result in a loss, even when no claims are made against them? This is the answer the Minister previously gave. I suggest that this is the type of thing which causes trouble. These little things all mount up to a big problem for workers. Will my right hon. Friend have another look at this?

Mr. Darling: The reason for the increase is that insurance companies, like most other people engaged in this kind of business, are now using mechanical devices which means that the costs of the single operation of looking after one policy are of course increased. [Laughter.] This is perfectly true. The increases have been explained to insured customers and are generally accepted. So far as I know, there have been very few complaints. If my hon. Friend has a case in mind where the increased premium has not been accompanied by an increase in the sum insured, I shall be glad to look into it. The minimum figure on which they are working now is a premium round about 1s. a week. Below that it is extremely costly to cover the operations.

Mr. Manuel: Does not my right hon. Friend recognise that in a period when we are applying a prices and incomes policy


this is quite reprehensible? These premiums are being paid by those in lower income groups. Although he passes it off as being only 1s. a week, every 1s. per week mounts up in the homes from where these premiums come.

Mr. Darling: If we go above £3 a week the operational costs tend to come down, and people paying something above 1s. a week are in fact benefiting from this because the insurance companies have given an undertaking that provided we can look after this cost problem they will not increase the premiums above £3 a week.

Development Areas (Factory Closures)

Dr. John Dunwoody: asked the President of the Board of Trade by what means he is informed of the impending closure of industrial concerns in the development areas.

Mr. Crosland: In the case of Board of Trade factories, we are informed when tenants give notice of their intention to vacate a factory. In the case of privately-owned concerns, there is no legal obligation to notify the Board of intended closures, but we normally learn of them either through the Ministry of Labour or other sources.

Dr. Dunwoody: Does not my right hon. Friend agree that it seems illogical, considering the time, effort and manpower which his Department puts into directing industry to development areas, that the Department has very little means of preventing industry leaving those areas? Will he consider taking steps to ensure that employers of, say, more than 50 workers should notify the Department three months in advance when they are considering closing works down?

Mr. Crosland: I should like to consider the second part of that supplementary question. We normally do learn of this, but I will consider whether there should be some clearer obligation. On the first part of the Question, there is a real difficulty in the sense that if a firm in a development area wants to close down because it is not making a commercial success of its operations there, I do not want to be put in the position of propping up a firm in those circumstances.

Mr. Gwynfor Evans: Is the right hon. Gentleman aware that of all the advance

factories built in Wales since October 1964 only two are now tenanted and that he has been unable to give me the number of men employed in them? Is the wretchedly small number of factories tenanted due to the fact that many firms have had to leave?

Mr. Crosland: That is a totally different question. There are an unusually high number of advance factories untenanted all over development areas. One of the objects of building advance factories is to attract industry and they are built before we can know who the tenant will be, but with the faster rate of expansion which we shall certainly get in the next twelve months I am quite confident that the number of advance factories untenanted in a year's time will be far smaller than it is today.

Air Services (South-West)

Dr. John Dunwoody: asked the President of the Board of Trade if he will take further steps to ensure regular air services between the far South-West and the remainder of the country.

Mr. J. P. W. Mallalieu: The provision and development of these, as of other British air services, is a matter for the commercial judgment and initiative of any interested operators, subject to compliance with licensing requirements.

Dr. Dunwoody: Would my hon. Friend not agree that the total absence of regular air services to the far South-West is one of the reasons why this area faces such very great difficulty? Will he reconsider his Answer and, if private companies are not prepared to do anything, will he approach the B.E.A. to see whether it would consider a service to the far South-West as in other parts of Britain?

Mr. Mallalieu: We have no powers of direction on that subject, but more licences have been taken up than are actually operated so far.

Mr. Emery: Would the hon. Gentleman make clear that where licences have been taken up and are now being operated his Department will encourage other people to investigate running commercially viable lines who could be granted licences in order so to do?

Mr. Mallalieu: I could not say a definite "Yes" to the second part of that


supplementary question because it is a matter for the Air Transport Licensing Board, but certainly the Board takes into account licences which have not been taken up and, after a period, it cancels them. Therefore, there is an opportunity to reapply.

Redundant Airline Pilots

Sir A. V. Harvey: asked the President of the Board of Trade how many airline pilots have become redundant since 1st June, 1967.

Mr. J. P. W. Mallalieu: This information is not available.

Sir A. V. Harvey: Why is it not available? The troubles now going on, the go-slow at B.E.A. and the more recent cut in the travel allowance will all have a very detrimental effect on this profession? How does he think he will get peace in the profession if he does not know what is going on?

Mr. Mallalieu: The fact of the matter appears to be that if a pilot is declared redundant today he is re-employed tomorrow and does not sign on, so the figures do not appear.

Mr. Fortescue: Does not the hon. Gentleman agree that in a very few years there will be a great shortage of pilots in Britain because of the retirement of very many ex-Service pilots who joined independent airlines and Corporation airlines immediately after the war?

Mr. Mallalieu: I do not think I can agree to that, because I understand that there are likely to be large-scale redundancies of R.A.F. pilots in the course of the next few years.

British Week Trade Fairs

Mr. Judd: asked the President of the Board of Trade whether he will make a statement on the value of British Weeks abroad, with particular reference to the recent British Weeks in Brussels and Toronto.

Mr. Alison: asked the President of the Board of Trade how much public money has been spent each year, respectively, since 1961 on promoting British Week trade fairs overseas; and what studies have been made, with what con-

clusions, as to the cost effectiveness of the outlay.

Mr. Crosland: I am satisfied that the British Weeks, of which eight have been held since 1964, have provided a valuable and effective method of promoting British exports. I am circulating in the OFFICIAL REPORT a statement of the cost of each of these Weeks. It is difficult to assess the increased trade attributable to a particular British Week, but I am assembling all available information about the results of a number of Weeks, including those of Brussels and Toronto, both of which appear to have been most successful. In the light of this information I shall keep future policy under review.

Mr. Judd: Does my right hon. Friend agree that, of whatever auxiliary assistance such weeks may be, they are no substitute for the will to sell exports? In what ways does my right hon. Friend hope that a stronger will can be demonstrated following devaluation? For example, has he considered rationalisation of the motor car industry and a concentration on fewer models with adequate after-sales service?

Mr. Crosland: I would certainly agree that British Weeks are in no sense a substitute for the will to export and for the normal sales export effort. As I told the House yesterday, I propose to have early meetings with the C.B.I. and the British National Export Council to see whether there is any more aid that the Government can give.

Mr. Boardman: Does not the right hon. Gentleman agree that the highest praise should be given to those industrialists and others who have voluntarily given so much of their time within B.N.E.C. to export promotion? Does he not also agree that the important thing is follow-up and the ability of manufacturers to get their goods through the docks?

Mr. Crosland: I would certainly echo the tribute to the voluntary time given by all businessmen connected with the B.N.E.C. I would strongly agree with the hon. Gentleman that the essential thing is that British Weeks should not be a glamorous once-for-all episode. What really matters is the follow-up effort afterwards. As to the hon. Gentleman's remark about the docks, I must


point out that 93 per cent. of the dockers in Britain are working. One must not get that position out of perspective.
Following is the statement:



£


1964



Dusseldorf
95,670


Denmark
80,681


1965



Amsterdam
84,272


Milan
142,817


1966



Hong Kong
72,381


Lyons
95,429


1967



Brussels
111,850


Toronto
152,500

Portsmouth Airport (Aircraft Accidents)

Mr. Judd: asked the President of the Board of Trade whether he will make a statement on the two aircraft mishaps at Portsmouth Airport on Tuesday 15th August last, and on any relevant implications for similar small airports elsewhere in Great Britain.

Mr. J. P. W. Mallalieu: Two HS.748 aircraft of Channel Airways were damaged when they overran the boundary after landing on wet grass. The accidents are being investigated and reports will be published. As a precaution immediate action was taken to apply larger safety margins for landings at Portsmouth and operators have been advised to allow for larger landing distances on wet grass elsewhere. Further study is in hand to determine what if any new limits should be prescribed for this and other aircraft at other grass airfields.

Mr. Judd: Does not my hon. Friend agree that the fact that a major disaster did not take place could almost be described as miraculous? Does he not agree also that, in view of the density of urban development in Britain and the limited air space available, there must be a strict comprehensive plan soon for the development of airports throughout the country and of internal air services?

Mr. Mallalieu: The last point raises an entirely different question. The steps which have been taken now will certainly prevent any recurrence of this disaster at Portsmouth.

Northern Region

Mr. Leadbitter: asked the President of the Board of Trade how many applications for industrial grants and loans from industrialists wishing to develop in the Northern Region are being considered by the Board of Trade Advisory Committee; and how many of these have been before the Committee more than 12 months, between nine months and 12 months, between six months and nine months, between three months and six months, and less than three months, respectively.

The Parliamentary Secretary to the Board of Trade (Mrs. Gwyneth Dunwoody): 161 applications in respect of the Northern Region were being considered as at 31st October, 1967. Details of the time applications have been outstanding are not readily available and it would involve disproportionate time and effort to extract them.

Mr. Leadbitter: Is my hon. Friend aware that this matter has been of great concern in the North and that a number of representations have been made to the Board of Trade? I was hoping to congratulate her on an improving position. Is she aware also of two major short-term problems? First, the new Bank Rate increases the difficulties being experienced in the North. Secondly, exporting industries there are in short supply. We need some quickly. Will she please expedite the procedure for dealing with B.O.T.A.C. applications?

Mrs. Dunwoody: I assure my hon. Friend that we are very conscious of the difficulties faced by the Northern Region, as by many other development regions. The time taken in dealing with B.O.T.A.C. applications has been speeded up recently.

Mr. R. W. Elliott: Is the hon. Lady aware that it is accurately estimated that we need 15,000 new jobs each year in the North-East to cover losses from declining industries alone? Is she aware further that this figure was achieved in 1964–65 but has not been achieved since? Will she do what she can to speed up the procedure of applications?

Mrs. Dunwoody: Yes; we are considering all the time ways of increasing


the speed at which B.O.T.A.C. applications are dealt with. In some cases the applicants themselves are responsible for some of the delays because they do not return the requisite information.

Mr. Woof: Why does secrecy prevail with the Board of Trade Advisory Committee when an application is turned down?

Mrs. Dunwoody: This is a difficult situation. The Board of Trade Advisory Committee is an independent body and, for obvious reasons, it goes into the cases very carefully. We do not ask the Committee for its confidential information.

British European Airways (BAC211)

Mr. Marten: asked the President of the Board of Trade if he will make a statement about the request by British European Airways for the British Aircraft Corporation 2–11 aircraft.

Mr. Crosland: No, Sir, but I hope to make one shortly.

Mr. Marten: Does not the right hon. Gentleman agree that if the European airbus does not get off the drawing board, as seems likely in view of Lufthansa's attitude, the British aircraft industry and Rolls Royce will be in great difficulties if B.E.A. does not have the BAC211? Does he not agree that the RB211 is an engine which is much quieter than others and has a great sales potential if it is put into a British aircraft?

Mr. Crosland: I certainly agree with what the hon. Gentleman has said about the RB211 and its potential export sales. I also agree that there is a very strong case for the 211. However, we have to take into account the fact that, in terms of launching costs to the Exchequer, of the various alternatives open to the Government and B.E.A. the BAC211 is by far the most expensive. Almost every hon. Gentleman who spoke from the Opposition benches yesterday said that in this new situation we ought to be cutting Government expenditure.

Mr. Paget: Does not my right hon. Friend feel that we have probably gone far enough in supporting an industry to produce unwanted aircraft at an uneconomic price?

Mr. Crosland: That is not the alternative that presents itself to the Government, because, whatever B.E.A. is allowed to buy, we have made it clear that it cannot buy American planes. It will buy British planes of one kind or another.

European Economic Community

Mr. Marten: asked the President of the Board of Trade if he will publish a White Paper on the effects of joining the Common Market.

Mr. Crosland: No, Sir. There have been several White Papers and other publications, and the matter has been extensively debated.

Mr. Marten: Does not the President of the Board of Trade recall that his immediate predecessor in office calculated that entry into the Common Market would cost Britain £600 million a year in a deficit on the balance of payments, which figure has now risen since devaluation? Is it not scandalous that his Department should not publish a White Paper either confirming or denying this figure?

Mr. Crosland: I have read the speeches and articles of my immediate predecessor with close attention. It was he himself who said on 26th July—
There is no intention at present to publish a White Paper on this subject."—[OFFICIAL REPORT, 26th July, 1967; Vol. 750, c. 156.]

Mrs. Renée Short: As my right hon. Friend said in yesterday's debate that import controls were not to be introduced because their introduction might prejudice our application to go into the Common Market, and as the imposition of import controls is a line which many of us think should be followed, does not he think that in the interests of our economy we should now withdraw the application and forget all about this nonsense?

Mr. Crosland: No. I take a totally contrary view. There are very many strong arguments against import controls, apart from the one I quoted.

Mr. Farr: Can the right hon. Gentleman say what are likely to be the effects on our trade with Australia if the gloomy predictions made by the High Commissioner of Australia are likely to prove correct?

Mr. Crosland: Like many hon. Members in all parties, I think that the predictions made by the High Commissioner were somewhat alarmist in character. As to predictions about the future pattern of trade, one cannot make these with total accuracy for some years ahead. The position is that the facts which are known have been exhaustively published and discussed. What there is not agreement about are judgments and opinions as to the likely consequences.

Mr. Shinwell: Although I have no personal feeling against my right hon. Friend, may I ask him whether the contents of a new White Paper would clear up the mystery of why his predecessor was dismissed from his post and why my right hon. Friend now occupies the position?

Mr. Crosland: I know that my right hon. Friend the Member for Easington (Mr. Shinwell) has taken an entirely objective view of all these matters. As to any explanation of Government changes, that is a matter for my right hon. Friend the Prime Minister.

Turnhouse Airport (Radar Equipment)

Mr. Stodart: asked the President of the Board of Trade, what communication he has had from the Edinburgh Airport Consultative Committee about the lack of surveillance radar equipment at Turnhouse; and what reply he has sent.

Mr. J. P. W. Mallalieu: The Consultative Committee has been informed, in response to its recent resolution on the subject, that the provision of surveillance radar at Turnhouse is under consideration. The Committee has also been given the assurance for which it asked that the absence of such a radar does not prejudice the safety of current operations at the airport.

Mr. Stodart: Can the hon. Gentleman say whether the consideration that he has given is any further forward than it was six months ago when he answered this Question? Is it true that the absence of radar costs an aircraft on average £5 a minute of waiting time to come down? Does the hon. Gentleman know of any other capial city in the world whose airport is not equipped with radar?

Mr. Mallalieu: The consideration of this subject is very much more advanced and I hope to announce a decision on this matter in two months.

Mr. William Hamilton: Is my hon. Friend aware that the improvement of facilities generally at Turnhouse and particularly the provision of a second runway will enormously facilitate—

Mr. Speaker: Order. There is a Question on the Order Paper about this.

South Africa

Mr. Patrick Wall: asked the President of the Board of Trade if he will make a statement on the expansion of the United Kingdom's trade with South Africa.

Mr. Biffen: asked the President of the Board of Trade by what amount and percentage the fee on board value of British exports to the Republic of South Africa has increased for the period January to October during the current year compared with the corresponding period in 1966.

Mr. Crosland: Our trade with South Africa this year has expanded in line with the large general expansion of South Africa's foreign trade. In the first 10 months of 1967 our exports rose by £24 million, or 12½ per cent. over last year, despite the dock strike.

Mr. Wall: While welcoming the fact that South Africa is now our second best customer, may I ask whether the best way of restoring our balance of payments would not be by supplying to South Africa the arms which she needs and is now getting from other countries? What is the point in having a defence agreement if we default on our moral obligation to supply arms for external martime defence?

Mr. Crosland: No, this matter has been discussed again and again and it remains the Government's firm policy not to sell arms to South Africa.

Mr. Biffen: Will the right hon. Gentleman take this occasion to express his extreme satisfaction that in this export market British exporters are doing so well? Will he indicate whether or not he thinks that this remarkable increase in


trade with South Africa is totally unconnected with the difficulties in Rhodesia?

Mr. Crosland: I think that this increase in trade with South Africa is—I repeat "is"—totally unconnected with the difficulties in Rhodesia. If hon. Gentlemen opposite will examine the share of British exports in South Africa, they will find that this share is substantially the same this year as it has been for many years past. Therefore, the connection that the hon. Gentleman is suggesting simply does not exist.

Mr. Molloy: Will my right hon. Friend take every precaution not to give the impression that the constitution of this country and of the present Government is not the best that money can buy?

Mr. Patrick Jenkin: Returning to the right hon. Gentleman's answer to my hon. Friend the Member for Oswestry (Mr. Biffen), surely the logic of the right hon. Gentleman's answer is that exactly the same is happening to everybody else's exports, namely, that they are going through South Africa to Rhodesia. Therefore, the logic of my hon. Friend's Question is quite irrefutable.

Mr. Crosland: No, I do not think the logic is irrefutable. If the hon. Gentleman will examine the figures of the trade of this country and of other countries with South Africa in the last three or four years, he will find that this trade can be explained in terms of the normal fluctuations of world trade that have occurred in that time.

Coalmining Areas

Mr. Woof: asked the President of the Board of Trade what steps he proposes to take in order to effect an improvement in the employment position in coalmining areas; by what date he expects to have completed and occupied sufficient new advance factories to provide 135,000 new jobs for men by 1970–71; how many factories are involved; and what the cost will be to the Exchequer.

Mr. Crosland: I would refer my hon. Friend to the Answer I gave on 14th November to my hon. Friend the Member for Rhondda, East (Mr. G. Elfed Davies).

The provision of advance factories is only one of the many methods employed by the Government to attract industry to the areas where it is most needed. It is not proposed to provide 135,000 jobs by building advance factories alone.—[Vol. 754, c. 84–6.]

Mr. Woof: asked the President of the Board of Trade whether, in view of the fact that 135,000 new jobs for men will be required in the coalmining areas by 1970–71 due to the Government's policy for running down the mining industry, he will indicate how many firms have so far agreed to move to these areas; and how many jobs for men they will be able to provide.

Mr. Crosland: The latest estimate of the rundown of manpower in coal-mining throughout the country by 1970–71 is roughly 100,000. Because of the movement of population the number of new jobs required will not necessarily be the same. In the coalfields most seriously affected by the rundown in coal-mining, those in the Scottish, Welsh and Northern development areas, 145 new firms have decided to set up factories since the end of 1964 and at present employ 4,260 men. Over 43,000 more new jobs for
men are expected to be created when these factories are complete and fully manned and from expansions now planned by firms already in these areas. The existing development area incentives and the special additional measures which I announced on 14th November should lead to the creation of further new jobs by 1970–71.

Mr. Woof: Is my right hon. Friend aware of the disastrous effects of contraction over many years in the Blaydon area? Is he further aware that local authorities in the area have spent a good deal of public money to provide sites for industries? Would he not agree that after the disappointing results in the development of industry, his Department should set a stronger pattern to build up a stronger economic and industrial structure in the area instead of leaving it like the little boy that Santa Claus forgot?

Mr. Crosland: I am very well aware of the problems to which my hon. Friend draws attention. It is precisely because


of our awareness of these problems that we not only now have very strong incentives in the development areas as a whole—so strong, indeed, that one hon, Member last night in the debate said that they were too powerful now—but, in addition to that, as I said on 14th November, we have announced further special incentives for those areas which will be particularly hard hit by colliery closures.

Dame Irene Ward: As the new fuel policy has just been announced, is the right hon. Gentleman not aware that we shall need much more attention to be given to the development areas with special kinds of jobs in order to absorb the miners who will be displaced? When are we going to hear about that?

Mr. Crosland: With respect, the hon. Lady has not been following our procedures very closely. On the same day that the White Paper on Fuel Policy was published, precisely for the reason she has given, we announced these additional incentives for the areas which are likely to be the worst hit.

Mr. Bob Brown: Could my right hon. Friend give me an assurance that there is the close liaison that there ought to be between his Department and the National Coal Board on pending and future closures?

Mr. Crosland: Yes, I can give my hon. Friend that assurance.

Mr. Emery: Does the right hon. Gentleman realise that there is one figure missing from the statistics that he has given? Will he say what the cost to his Department is estimated to be in the period of run down till 1975?

Mr. Crosland: We have announced the total cost of the special measures that will be taken to assist in solving the problems raised by the rundown of the industry. We have not as yet broken the figures down completely between the Departments, but I will get a figure and will write to the hon. Gentleman about it.

Sir K. Joseph: Would the right hon. Gentleman agree that, with the best will in the world, his Department will not be successful until confidence is reestablished in industry and that the Government's failures on the economic front

are doing grave damage to the re-establishment of that confidence?

Mr. Crosland: I would entirely agree that this kind of problem cannot be effectively solved except against background of rapid growth and expansion. The measures announced over the week end were designed precisely to ensure that.

Motor Cars (United States and Canada)

Mr. Bruce-Gardyne: asked the President of the Board of Trade what steps have been taken by Her Majesty's Government to secure the revocation of the waiver to Article I of the General Agreement on Tariffs and Trade granted in December, 1965, to the United States Government in respect of United States imports of motor cars from Canada, in view of the fact that the Canadian share of the United States market for imported cars increased two and a half times in 1966 while the United Kingdom share declined by one-third.

Mrs. Gwyneth Dunwoody: Exports of motor cars from the United Kingdom to the United States of America rose from £40,500,000 in 1965 to £50,342,000 in 1966. The G.A.T.T. waiver falls due for review at the end of this year when the contracting parties will consider how far in the prevailing circumstances the United States will continue to need its cover to implement the agreement with Canada.

Mr. Bruce-Gardyne: Would not the hon. Lady agree that the figures which she gave do not in any way refute the figures in the Question? Will she recall that the previous President of the Board of Trade gave me a categorical undertaking that if there was a diversion of trade this waiver would be withdrawn? As there has been a diversion of trade, are we to treat this as yet another of the Government's empty pledges?

Mrs. Dunwoody: I cannot agree with the hon. Gentleman that the figures prove that there has been a diversion of trade. He might like to note that, in spite of a big rise in our exports to the United States market, Continental and Japanese cars did even better and our rate of increase has fallen off more sharply this year than theirs has. It is from those


countries that our companies face the most serious competition.

Mr. Bruce-Gardyne: asked the President of the Board of Trade if he will withhold signature of the Geneva Protocol to the agreement resulting from the Kennedy Round of tariff negotiations pending assurances regarding proposals for quota restrictions on imports currently before the United States Congress.

Mr. Crosland: No, Sir. The Order giving effect on 1st July, 1968, to the first tariff reductions resulting from the Kennedy Round will be laid before Parliament in due course. It is the intention of Her Majesty's Government to sign the Protocol when that Order has been approved.

Mr. Bruce-Gardyne: Would not the right hon. Gentleman agree that it would be totally regrettable for this country to surrender our right to resist protectionist measures in the United States, particularly bearing in mind that those protectionist measures are being taken by a country which is running a very large visible trade surplus?

Mr. Crosland: I think that it is extremely important to us in this country to do everything we can to discourage new protectionist measures in the United States. As the hon. Gentleman will know, we, along with many other industrial countries, have made strong protests on this subject. I should have thought that the danger of these measures had substantially receded in the last few weeks. In any case, the question is whether our refusal to sign the Protocol would be of any help in combating these protectionist tendencies. I think that it would be purely counter-productive.

Developing Countries (Tariff Preferences)

Mr. Higgins: asked the President of the Board of Trade what is Her Majesty's Government's policy towards proposals which are being made for United Nations Commission for Trade and Development members to implement general tariff preferences in favour of developing countries on a non-reciprocal basis; and if he will make a statement.

Mr. Crosland: Our policy has consistently been to support the grant of special tariff treatment by all industrial-

ised countries to imports of manufactures and semi-manufactures from developing countries. This subject will be discussed at the forthcoming meeting of the O.E.C.D. Council at Ministerial level, and subsequently at the meeting of the U.N.C.T.A.D. in New Delhi next February.

Mr. Higgins: As devaluation effectively increases the barriers to less developed countries' manufactured exports to this country, are we to understand from what the right hon. Gentleman has just said that he will press for an increase which is more than proportionate to offset this additional protection?

Mr. Crosland: I am glad that devaluation will have a very healthy effect on the trade in commodities of a considerable number of the under-developed countries. The answer to the second part of the supplementary question is "No", because we have never envisaged this as a concession which we would make unilaterally, but only as one—and here we are in agreement with our predecessors—which we would make in concert with all the other major industrial countries.

Under-developed Countries (Transport Vehicles)

Mr. Pavitt: asked the President of the Board of Trade if he will call for reports from his officials attached to High Commission staffs in Commonwealth under-developed countries on the type of vehicles needed to develop and improve transport within the countries concerned and the credit facilities and technical facilities needed to ensure that British-made vehicles are exported.

Mrs. Gwyneth Dunwoody: High Commission staffs in these countries report regularly on these and other factors affecting the market for vehicles, as do all Diplomatic Service commercial offices abroad. These reports, and information on credit facilities, are readily available here.

Mr. Pavitt: Is my hon. Friend aware that this is one of the initiatives of the car workers organised in the National Union of Vehicle Builders who are anxious to increase our exports? Would she seek to increase the present car exports by getting consultation at the


planning stage in countries like India, where they have five-year plans and can, therefore, anticipate demand?

Mrs. Dunwoody: We are always anxious to do everything we can to assist the under-developed countries. The policy of Her Majesty's Government is that aid should be given to the under-developed countries and it is for the recipient Government to decide how they wish to use it.

Carriage Insurance Company

Mr. Arnold Shaw: asked the President of the Board of Trade whether he will make a statement on the current position of the Carriage Insurance Company.

Mr. Darling: In pursuance of its powers under Section 68 of the Companies Act, 1967, the Board of Trade directed the company with effect from 1st November to restrict its motor insurance business, that is to say, to cease entering into or varying contracts. The Board, being satisfied that the grounds for the direction no longer applied, withdrew it on 15th November.

Mr. Shaw: I congratulate the Department on the swift action taken in connection with this company. Would my right hon. Friend answer these questions? First, why was the Companies Registration Office unable to show on the file on 21st November the names of the new directors? Secondly, is he satisfied that there are adequate reinsurance facilities? Thirdly, has any further capital gone into the company, considering the weakness of the balance sheet?

Mr. Darling: We have gone into the point about reinsurance very carefully, and we are satisfied that the re-insurance arrangements are now adequate. The reason why the new directors' names have not appeared in the Companies Register is that, because of the new Companies Act, the Registrar is temporarily behind with the filing of new registrations. The capital has been increased by a further £48,000, which brings it up to £100,000. We think that that is adequate for the insurance which the company has effected.

Domestic Air Routes

Mr. Biffen: asked the President of the Board of Trade what proposals he

has to promote greater competition on domestic air routes.

Mr. J. P. W. Mallalieu: None, Sir. The hon. Member will be aware that the Edwards Committee is now looking into questions of this kind. The House will not expect me to anticipate the Committee's recommendations.

Mr. Biffen: Is the hon. Gentleman aware that a free enterprise company, British Eagle, wished to undercut other companies in this field and was prevented from doing so by the Air Transport Licensing Board? Does it not make nonsense of the supposed prices and incomes policy that a free enterprise company which wishes to undercut should be prevented from doing so by a public authority?

Mr. Mallalieu: The whole question of the operations of the Air Transport Licensing Board is being reviewed by the Edwards Committee. The question of the effectiveness or desirability of competition comes into that. It is a two-sided issue.

Mr. Corfield: Since there is a considerable subsidy on most domestic routes operated by B.E.A., is it not time that the subsidy was identified and the independents given an opportunity to operate on the same terms?

Mr. Mallalieu: I do not recognise that there is a subsidy for B.E.A. I wish that I could say that these domestic lines were generally profitable. They are not.

Private Companies

Mr. Farr: asked the President of the Board of Trade what study he has made of the causes of the sharp fall in the numbers of new private companies registered; what conclusions he has reached; and what steps he is taking to correct this trend.

Mr. Darling: A wide variety of factors appears to have contributed to the decline in recent years in the number of new private companies registered. I do not consider it necessary to take steps to reverse this trend. The Companies Act, 1967, increased fees for the registration of companies. One of the purposes was to check their proliferation.

Mr. Farr: As new registrations are steadily declining in number and bankruptcies are steadily increasing in number, is it not a fair indication that it is probably the Socialist method of conducting the affairs of this country which is the prime cause of the situation?

Mr. Darling: The hon. Member's figures are quite inaccurate to support that kind of argument. Since 1965, 60,000 new private companies have been registered. The figures are declining now because the new Companies Act abolished the status of the exempt private company.

Mr. Barnett: Would it not be totally wrong to encourage small companies near to bankruptcy to register? Would my right hon. Friend confirm that much of the decline is due to the totally false picture given by hon. Members opposite about tax advantages to businessmen in close companies who plough back their profits?

Mr. Darling: I agree entirely.

Central West Fife

Mr. William Hamilton: asked the President of the Board of Trade how many new jobs are currently in prospect in the Central West Fife area covering the employment exchange areas of Cowdenbeath, Dunfermline, and Inverkeithing; and to what extent such jobs will reduce existing male unemployment.

Mrs. Gwyneth Dunwoody: In the three exchange areas of Cowdenbeath, Dunfermline and Inverkeithing, there are 1,750 jobs in prospect, of which 850 are for males. These are expected to arise during the next few years in authorised new industrial developments and in existing premises taken over by manufacturing firms. This does not include any estimate in respect of advance factories not yet allocated. The total male registered unemployment in the three exchange areas in October, 1967, was 1,190.

Mr. Hamilton: Is my hon. Friend aware that an intolerable discrepancy has developed in the past 10 years between the number of male jobs provided and the number of male jobs lost, principally in the mining industry? Can she give an assurance that in future the new policies

will remove, or at least reduce, that discrepancy?

Mrs. Dunwoody: My hon. Friend will be pleased to know that four Board of Trade advance factories, which will materially assist the situation, are under construction in the three employment exchange areas. We are making every effort to assist these areas, because we realise that they have particular employment difficulties.

Consumer Council (Grant)

Mr. Francis Noel-Baker: asked the President of the Board of Trade whether he will increase the present grant to the Consumer Council, in order that it should be able to provide a more effective and comprehensive service to the public, particularly in action as a watch over advertising.

Mrs. Gwyneth Dunwoody: The Council's proposals for its grant-in-aid in 1968–69 were received earlier this month, and are now being considered.

Mr. Noel-Baker: Although there is need for economy, does my hon. Friend agree that it is very important to have an independent scrutiny of advertising, and that what the Council has done so far with its limited resources has been very useful?

Mrs. Dunwoody: We naturally pay a great tribute to the amount of work done by the Council, particularly in this matter.

Mr. Blaker: Would it not give much needed protection to the consumer if the Consumer Council could watch over the Government's advertising policies? Is not the need for this shown by the Government's recent appointment of 113 extra Press officers?

Mrs. Dunwoody: Part of the Government's advertising costs are incurred in making efforts to get employment into the development areas, which I think is a very sensible way of spending money.

Pre-Packed Goods (Weights and Quantities)

Mr. Francis Noel-Baker: asked the President of the Board of Trade if, in drafting legislation in consumer protection, he will seek to ensure that goods of


common consumption including confectionery, cosmetics, soap and detergents can be sold only in recognised quantities, in order to prevent concealed price increases.

Mrs. Gwyneth Dunwoody: The Weights and Measures Act, 1963, already requires indications of quantity on nearly all pre-packed articles of these kinds unless the quantities are very small. A price increase cannot, therefore, be concealed.

Mr. Noel-Baker: Does my hon. Friend agree that the exceptions are very important to the housewife, and will she look at the matter again?

Mrs. Dunwoody: I agree that it is very aggravating when small amounts are involved, but at present there is no likelihood of this question being re-examined.

Mr. Lubbock: In view of the requirement that the price of goods should be displayed on the pack, will the hon. Lady also consider making a requirement that the price per unit should be shown, so that the housewife can compare similar goods sold in different pack sizes?

Mrs. Dunwoody: The matter of how packs are marked is being examined, because there is the whole question of changing to the metric system.

B.O.A.C. Pilots (Dispute)

Captain Orr: asked the President of the Board of Trade whether he is satisfied that passenger safety is not imperilled as a result of the dispute between British Overseas Airways Corporation and its pilots; and if he will make a statement.

Mr. J. P. W. Mallalieu: There is no evidence that the dispute is affecting the safety of flight operations. The Corporation is watching the position closely and my officials are in close touch with it; regular flight inspections by Board of Trade officials are being carried out. Should any special safeguards be thought to be necessary they will, of course, be applied.

Captain Orr: How can the Minister be so sure about safety? If the Corporation is not now talking to the pilots how can it get the pilots' advice about

such matters as scheduling safety and flying over combatant areas? Would the Minister encourage the Corporation now to talk to the pilots so that we can be certain about passenger safety?

Mr. Mallalieu: On these matters the Corporation is talking to the pilots every day of the week.

Mr. Rankin: Does not this morning's news indicate that B.O.A.C.'s pilots have decided to continue normal duties?

Mr. Mallalieu: I understand that there has been a great improvement in the situation.

Knitwear Imports (Portugal)

Sir C. Osborne: asked the President of the Board of Trade, in view of the fact that imports of knitwear from Portugal for the first half of 1967 amounted to £1,789,000, compared with £464,000 for the first half of 1966, and of the short-time and unemployment that this has created in the industry, what action he proposes to take to safeguard the livelihood of the people engaged in the trade.

Mr. Crosland: While imports from Portugal have increased in this period, total imports in the first eight months of this year still represented only about 7·7 per cent. of home production. I have no present proposals for action.

Sir C. Osborne: Does the Board of Trade mean to allow the hosiery industry to suffer the same fate as the Lancashire cotton industry? If not, will the right hon. Gentleman take steps about the matter?

Mr. Crosland: We do not intend to allow that. As the hon. Gentleman knows, the hosiery industry is an expanding growth industry. There has been a sharp up-turn in production since June. There is now an up-turn in employment, and exports this year are 24 per cent. higher than last year, I am delighted to say. As to imports, Portugal has not devalued, and therefore the industry now has a 15 per cent. competitive advantage.

Mr. Mapp: The implications of the import flow in this question are of equal application to both yarn and cotton piece goods. Will my right hon. Friend bear this in mind and take vigorous action to deal


with the sub-standard wages and the substandard pricing policy operating in Portugal?

Mr. Crosland: I entirely understand that these problems concern the cotton textile industry as well. But 74 per cent. of our cotton cloth imports come from countries which have not devalued, and over which we therefore now have a very large competitive advantage.

Mr. Patrick Jenkin: When will the President of the Board of Trade implement the undertaking he gave to the weavers' union to introduce legislation to strengthen the anti-dumping laws?

Mr. Crosland: Early next year.

Mr. Rose: Can my right hon. Friend at this stage give any estimate of the likely effect of devaluation on imports of textile goods? If it is not going to be significant will he take direct action, which would have a great deal of support in Lancashire and elsewhere, to deal with the flow of imports from this rather anomalous E.F.T.A. ally?

Mr. Crosland: It is not possible under E.F.T.A. rules for us to restrict imports directly from Portugal, but I am aware of the very strong feelings held in Lancashire on the subject and I propose to discuss very shortly with the Textile Council what effect devaluation will have on the whole imports situation.

Eastern Europe

Mrs. Renée Short: asked the President of the Board of Trade what proposals he has for improving trade with all countries of Eastern Europe; and what improvements he is introducing in his Department and bodies connected with it for the purpose of stimulating and encouraging trade with Eastern Europe.

Mrs. Gwyneth Dunwoody: Trade with most East European countries continues to expand satisfactorily. Our exports in the first 10 months of 1967 were 23 per cent. above those for the corresponding period of 1966. The Board of Trade, in conjunction with British embassies, the East European Trade Council and the other trade organisations concerned will continue to do all it can to foster this trade.

Mrs. Short: Is my hon. Friend aware that trade with the whole of Eastern Europe, with its enormous population, is a derisory amount compared with the potential for exports that exists there? Can she say why the recently formed East European Centre has a member of the Opposition party appointed as its chairman? Was this the fault of the Board of Trade or the Foreign Office? Why were the officers of the Parliamenmentary East-West trade group not invited to take part in this?

Mrs. Dunwoody: We are always anxious to expand our trade with the Eastern European countries and there is good evidence that this is taking place. I understand that my hon. Friend is vice-chairman of the all-party East-West trade committee. I am sure that she will do everything she can to assist us in this work.

Mr. Biggs-Davison: While this trade is expanding, can the hon. Lady say whether the balance of trade is satisfactory with the Eastern European countries, particularly the U.S.S.R? In our economic plight, will the Board of Trade watch this very carefully?

Mrs. Dunwoody: We shall certainly do so, but the balance is very satisfactory.

Manufactured Goods (World Export Markets)

Mr. Leadbitter: asked the President of the Board of Trade what has been Great Britain's share of world export markets for manufactured goods for the years 1964, 1965, 1966 and the latest position for 1967, respectively.

Mr. Crosland: The United Kingdom's share of exports of manufactures by the main manufacturing countries was 14·0 per cent. in 1964, 13·5 per cent. in 1965, 12·9 per cent. in 1966, and 12·6 per cent. in the first six months of 1967. Ten years ago it was 19 per cent.

Mr. Leadbitter: Is my right hon. Friend aware that our share of manufactured exports in the world has been falling for a considerable time? Is he aware that some of us believe that this is due to an excess of energy being used to get into the Common Market, and our designing our economic policies for that purpose? Does he agree that we should


get off this hobby-horse and develop world and Commonwealth markets instead?

Mr. Crosland: I regret to say that the fall in our share of the trade in manufactures began long before anybody considered the Common Market.

South-West Economic Planning Council (Report)

Dame Joan Vickers: asked the President of the Board of Trade if he has studied the report of the South-West Economic Planning Council, "A Region With a Future"; and if it is his policy that Plymouth should become a development area.

Mrs. Gwyneth Dunwoody: The report is still being carefully studied. I cannot comment on its recommendations at this stage.

Dame Joan Vickers: Will the hon. Lady realise that Plymouth, through its own efforts, has risen from being the worst blitzed city in the country and that it will be hit by the Government's proposals in regard to defence cuts, S.E.T. and the proposals in the White Paper on Transport of Freight?

Mrs. Dunwoody: I am well aware of the position in Plymouth. We will bear it very sympathetically in mind.

PERSONAL STATEMENT

Mr. Enoch Powell: With your permission, Mr. Speaker, I should like to make a personal statement.
At col. 1146 of yesterday's OFFICIAL REPORT, the right hon. Gentleman the President of the Board of Trade quoted a statement as coming from a speech by me. The speech in question was delivered on 25th May last at Hanwell, and the full text was issued to the Press at the time.
The quotation given to the House yesterday consists of a combination of three distinct passages. The first two were separated in the original by three sentences not quoted. [HON. MEMBERS: "Oh."] The third passage occurred about 350 words later—

Hon. Members: Oh.

Mr. Speaker: Order. Personal statements are listened to in silence.

Mr. Powell: —about 350 words later, in a context wholly unconnected with the £ sterling.

The President of the Board of Trade (Mr. Anthony Crosland): Mr. Speaker, with permission I should also like to make a statement, because it has been implied that I distorted what the right hon. Gentleman said.
I quoted from a report, which I had in front of me, from the Daily Telegraph. This report, as far as I know, has not been challenged or disputed. I did not wish to weary the House by quoting it in full, but I quoted a continuous passage about "that great national totem, the pound sterling".
I did not then quote the next three sentences, although they strongly supported my argument and were concerned with the £ sterling and economic policy nor, indeed, the succeeding sentence about "rushing hither and thither containing Communism".
I quoted a concluding sentence which, to any objective reader, appeared to be a summary of the entire argument. No one who reads the whole report can possibly believe that I in any way distorted the right hon. Gentleman.
I propose to place a copy of the whole Report in the Library so that hon. Members can judge.

Mr. Shinwell: On a point of order, Mr. Speaker. If I may venture to say so, during my long experience in this House I cannot recall any occasion when an hon. or right hon. Member had the right from the Dispatch Box on the Opposition side to seek the permission of the House to have any statement made by him in a speech corrected. If that is to be the position in future, may I ask for your permission so that many speeches that I have made in the past which have been distorted by the Opposition can be corrected?

Mr. Speaker: I am sure that the right hon. Gentleman, like every other right hon. and hon. Gentleman in the House, has made speeches which he wished to be corrected. This was not the issue. Personal statements are not debatable.

Several Hon. Membersrose—

Mr. Speaker: Order. I have ruled that personal statements are not debatable in the House.

Mr. Emery: On a point of order, Mr. Speaker—

Hon. Members: Sit down.

Mr. Speaker: Order. I am being addressed on a point of order.

Mr. Emery: On a point of order, Mr. Speaker. As personal statements, as you have ruled, are not debatable, has not the situation been changed by the fact that when a personal statement has been made it is then followed by another statement in reference to the original personal statement?

Mr. Speaker: With respect, the hon. Gentleman must read his Erskine May. The Ruling in Erskine May is that if another Member is involved in the personal statement he is generally allowed to give his own view of the matter and say whether he accepts it or not. There is no new order today.

BILL PRESENTED

HEALTH SERVICES AND PUBLIC HEALTH

Bill to amend the National Health Service Act 1946 and the National Health Service (Scotland) Act 1947 and make other amendments connected with the National Health Service; to make amendments connected with local authorities' services under the National Assistance Act 1948; to amend the law relating to notifiable diseases and food poisoning; to amend the Nurseries and Child-Minders Regulation Act 1948; to amend the law relating to food and drugs; to enable assistance to be given to certain voluntary organisations; to enable the Minister of Health and Secretary of State to purchase goods for supply to certain authorities; to make other amendments in the law relating to the public health; and for purposes connected with the matters aforesaid, presented by Mr. Kenneth Robinson; supported by Mr. Wm. Ross, Mr. Cledwyn Hughes, Mr. Harold Lever, Mr. Bruce Millan, and Mr. Julian Snow; read the First time; to be read a Second time torn arrow and to be printed. [Bill 12.]

Orders of the Day — SUPPLY

[3RD ALLOTTED DAY], considered.

Orders of the Day — ECONOMIC SITUATION

Order read for resuming adjourned debate on Question [21st November]:
That this House approves the Statement of 20th November by the Chancellor of the Exchequer on the measures in relation to the economic situation.

Question again proposed.

3.36 p.m.

Mr. Edward Heath: Throughout this debate so far the arguments have been heated and feelings have run high. This is understandable. [HON. MEMBERS: "Why?"] Hon. Gentlemen ask why. I will tell them. It shows that changing the value of the national currency is still a matter of the utmost importance and one which arouses feelings of deep emotion not only in this House, but in the country as a whole.
Yesterday, the President of the Board of Trade, in his speech, raised the question of morality. Well, we all know that it is legal in the international world to change the value of currencies in certain circumstances. But the fact that it is legal does not exclude, also, a belief in this country and in many others that there is a moral aspect to it. In fairness to the Chancellor of the Exchequer, it is an aspect which he has always recognised, and, I believe, still recognises. The Secretary of State for Economic Affairs went so far as to dismiss this as humbug.
The President of the Board of Trade, when dealing with the matter said:
these sterling balances have been earning very high rates of interest over many years, and these cumulative earnings much more than offset the loss involved in the 15 per cent. devaluation."—[OFFICIAL REPORT, 21st November, 1967; Vol. 754, c. 1147.]
What an astonishing doctrine for a senior member of this Administration to put forward at such a time! In other words, because we have carried out our obligations to pay interest on the balances deposited with us he believes that Her Majesty's Government can walk off with one-sixth of the capital with impunity.


How does he expect his Government to regain the confidence of other countries, or to secure further sterling deposits at a time when the Chancellor of the Exchequer desperately needs them, or to maintain the sterling area, when he is propounding a doctrine of this kind? 
The Government as a whole are making a great mistake if they think that, as the hon. Member for Ebbw Vale (Mr. Michael Foot) suggested, they can treat this as purely a technical matter. In the country there is deep, burning resentment at the Government's action. There is real anger at a breach of faith, and the country condemns the Government for having brought it to this humiliating position. It is a personal anger which is increased by the Prime Minister's
statement, what will now for long be a famous statement, in his telecast:
 It does not mean, of course, that the pound here in Britain, in your pocket or purse or in your bank, has been devalued.
That broadcast will long be remembered for that sentence. It will be remembered as the most dishonest statement ever made, ever made even by the Prime Minister.
The whole country must have been astonished by the cheers yesterday afternoon from the benches opposite about devaluation, from the same masses who, on 24th July, were cheering the firm stand of the Chancellor of the Exchequer. Recognising their great relief at being able to unite on something, even be it united in dishonour, at least it was shaming to hear the cheers from the benches opposite.
But this two-day debate is not the end of the matter. It is but the beginning of a long and hard course for this country to follow. The ramifications of devaluation will spread far and wide. They are already to be seen in the pressure on the dollar—an all-out attack—the question of the future of the sterling area and the relations of Britain to other Commonwealth countries and other impacts and effects which cannot be foreseen or foretold. Indeed, it is just this uncertainty throughout the world about the effect of a major step such as this which is one of the most powerful reasons for any Government not devaluing the currency.
The hon. Member for Pembroke (Mr. Donnelly) said yesterday that there was a sense of unreality in the debate. It is easily understood. Ministers and the Labour Party in this debate are arguing against all their own previous declarations. They are arguing against all their own earlier policies and against their previous pledges. This explains the somewhat surprising but pitiful speeches from the Government Front Bench yesterday, from the President of the Board of Trade and from the Secretary of State for Economic Affairs. It explains the contradiction between the Prime Minister saying that this goes to the root of the problem and the Chancellor of the Exchequer still saying that, of course, this is only one aspect which does not in fact deal with the fundamentals. It explains how few of the measures which the Government have now taken have been thought through. It explains how little information the House has been given in answer to the questions put to Ministers yesterday.
No detailed justification has been given to the House or the country by the Government for taking this step, nor has there been any estimate of the consequences in detail for the country of the Government's measures. I wish that the Chancellor of the Exchequer had followed the example of his predecessor in 1949 and had opened the debate yesterday, so as to give the House the full and detailed account which he alone can give.
I wish to return the House to the basic arguments concerning devaluation. Never have they been better set out than by the Chancellor on 24th July, 1967, a very few months ago. It was a classic exposition. Of course, the Prime Minister has better phrases, more illuminating, more flashing. In 1963 he said:
 Devaluation would be a lunatic and self-destroying operation.
The flashing phrase gets the headline, but the Prime Minister has never been particularly good at exposition. That is not his strong point. He excels in smear and innuendo and in the last-minute so-called revelation, and no doubt we shall hear a great deal of smear and innuendo today.
The Chancellor's exposition now deserves study, because it deals with every point so far raised in the debate. I will take it section by section.

The Secretary of State for Foreign Affairs (Mr. George Brown): Hear, hear.

Mr. Heath: The Foreign Secretary says "Hear, hear." The right hon. Gentleman takes the view, "If you cannot beat him, join him", but he may find that he is pushed out instead.
The Chancellor said:
I come now to the question of devaluation … It is no way out. I used the phrase many months ago—'It is a flight from reality'. The Government's policy is quite clear; it remains exactly as it has always been, namely, that we reject the notion that our economic strategy should include a change in the exchange rate of the £.
That was a perfectly clear declaration and the Chancellor stood by it manfully and went on to argue it basic point by basic paint:
The fundamental fact about devaluation as a deliberate act"—
a deliberate act—
is that it consists in making the product of the labour of our people cheaper while making the product of foreign labour dearer.
That precisely sums up the total effect of devaluation.
The Chancellor went on to say:
Let there be no dodging about this".
He said—

Hon. Members: Read all of it.

Mr. Heath: I am prepared to read the whole of the Chancellor's speech, because it is admirable. He said:
Let there be no dodging about this. Those who advocates devaluation are calling for a reduction in the wage levels and the real wage standards of every member of the working class of this country.
I hope that the Chancellor will not try to explain that away, because he was right when he said it and it is right today and he knows it. Let him not try to adopt the Prime Minister's attitude of the bogus £ in the purse, but stick to his principles, which he has upheld.
Last night, the Secretary of State for Economic Affairs discussed the increase in exports which will be necessary. If he wants to be precise, they will have to increase by 17 per cent.—40 points on 2·40—to keep us in the same position. The Secretary of State and his friends and the Chancellor cannot have it both ways. They cannot say that this is done to give a real competitive edge, which, in

fact, means reducing prices substantially, and, at the same time, say that it is not necessary to have extra production so as to get the same return. Such an argument would be untenable.
The plain fact is that if the Chancellor wants a keen competitive edge, which means a substantial reduction in prices, every worker will have to produce far more even to stay in the same place. That is what the Chancellor meant when he made his statement in July. [Interruption.] If the Foreign Secretary agrees, he had better tell the workers that they have got to produce far more to stay where they are. It is not what his hon. Friends below the Gangway believe or say.
The whole argument is whether devaluation gives British manufacturers a better incentive to export at higher profits. This is not an argument which the Chancellor has used, but this is the argument mainly used by economic commentators. Neither the Secretary of State nor the Chancellor of the Exchequer accept the argument, as I understand it, and they have demonstrated that by increasing Corporation Tax by 2½ per cent. Therefore, the main argument for devaluation which is put by outside commentators is demolished by the Government themselves, because they will not make exports more profitable for the British exporter whose profits are to be taxed and taken away.
It is said that devaluation will produce additional employment the hon. Member for Ebbw Vale is quite right. But what will those who are working longer hours and those who are now employed be doing? They will be increasing production to meet these exports and getting no return from overseas markets for it. That is the first thing they have to do.
Of course, later on there may be some improvement in our employment position, but the only purpose will be to produce the extra goods which we require to stay in the same position, before we get any additional benefit.

Mr. Michael Foot: Would the right hon. Gentleman also comment on the fact that one of the things which will happen is that we will be able to produce at home more of the goods which we are now importing, and


that this will become easier? That certainly applies to the steel industry, or does the right hon. Gentleman say that it will not happen to the steel industry?

Mr. Heath: Yes, and it will still have to import iron ore at more expensive prices. When foodstuffs and raw materials provide the greater part of our imports, the cost of all those goes up.

Mr. Archie Manuel: Not all of them.

Mr. Heath: The Chancellor of the Exchequer—[Interruption.] Of course, hon. Gentlemen do not like meeting the arguments. The Chancellor of the Exchequer went on:
… the cost of meeting our foreign debts would be increased.
That, again, is absolutely true. The re-payment, and servicing of the debts and the cost of the existing defences of this country overseas are increased. The cost of foreign aid spent in local costs and elsewhere than in Britain is also increased. Alternatively, we do less to help the developing countries. Once again, extra production will go to meet the additional costs which come about automatically through devaluation.

Mr. Robert Maxwell: Will the right hon. Gentleman give way?

Mr. Heath: I will finish my sentence first. In fact, the devaluation of the £ is the devaluation of human effort.

Mr. Maxwell: I am obliged to the right hon. Gentleman for giving way. Would he not agree that he obviously appears not to understand the facts? I am a major exporter in this country—[Interruption.] Many thousands of exporters will have done what I have done—[Interruption.]—which is to increase the sterling price equivalent so that the benefit of devaluation entirely comes to this country, and I shall not be exporting one extra sheet of paper to obtain the same amount of foreign exchange.

Hon. Members: Answer.

Mr. Heath: I will answer the hon. Member for Buckingham (Mr. Maxwell). If he has increased his price accordingly, he will be getting exactly the same amount back in foreign currency as

before, and if the price is the same he will not be increasing his exports. But, if he can increase his exports, why did he not increase them before?

Mr. Maxwell: Mr. Maxwell rose—

Mr. Speaker: Order. The right hon. Member for Bexley (Mr. Heath) is obviously not giving way.

Mr. Maxwell: Mr. Maxwell rose—

Mr. Speaker: Order. Mere insistence does not mean that the right hon. Gentleman must give way.

Mr. Heath: Mr. Heath rose—

Hon. Members: Give way.

Mr. Heath: Perhaps the hon. Gentleman and I can end hostilities if I congratulate him on the way in which the shares of his company have risen in the past 24 hours.

Hon. Members: Cheap.

Mr. Heath: Obviously, not cheap. Very expensive. It indicates that people would rather hold his shares than money, and I congratulate him. [An HON. MEMBER: "What about the Queen's Award?"] Yes, and he earned it.
The next point for the Secretary of State is the reduction—[Interruption.]

Mr. Speaker: Order. I must appeal to the House. This noise helps neither Parliament nor Britain.

Mr. Sydney Silverman: On a point of order, Mr. Speaker. Is it in accordance with the custom of this House for the right hon. Member for Bexley (Mr. Heath) to challenge an hon. Member on this side of the House by means of a direct question, and then refuse to give way to him?

Mr. Speaker: Whether the right hon. Gentleman gives way is a matter for himself to decide. In fact, I think that the right hon. Gentleman had given way.

Mr. Heath: I have not challenged the hon. Member for Buckingham. I have answered his question, and I want now to move on to the next point, about export costs. After all, the whole of the Government's case is based on the fact that they will improve exports by devaluing—

Mr. Maxwell: Hear, hear.

Mr. Heath: —but the reduction of export costs will not—

Mr. Maxwell: Mr. Maxwellrose—

Hon. Members: Sit down. Name, name.

Mr. Speaker: Order. The Chair needs no advice. The hon. Member for Buckingham (Mr. Maxwell) must keep his seat.

Mr. Heath: The reduction in export costs will not be anything like the full 15 to 17 per cent. which the Secretary of State has suggested is possible. There is the removal of the export rebate and the Selective Employment Premium, except in the development areas, there are the additional costs of raw materials, of fuel, and Corporation Tax. These may well amount to about 8 per cent. during the course of the next year. If the Prime Minister does not agree with that figure, let him give us an alternative one, because we have been given no figure so far. The point is that the advantage which our exporters will get will be limited quite severely and nothing like as great as the real effect of devaluation.
Now I turn to the question of deflation, which has occupied the minds of hon. Gentleman opposite so much. In his statement, the Chancellor said that the purpose of devaluation
… is to ensure a sudden and large-scale shift in resources from home use to export. The means by which this can be done is by increasing taxes or reducing Government spending programmes, or both. That is what one has to do to make devaluation work.
He is quite right, and that is deflation. It is what the Government tried on 20th July, 1966, in order to switch resources from home consumption to exports, and it is what they are doing now by a new means of devaluation. The Chancellor is quite right, and the Government have to pursue these policies to get the advantage of it. So we have changes in hire purchase which are deflationary, Bank Rate at 8 per cent., additional taxation, some unspecified cuts in Government expenditure, including the nationalised industries, and the withholding of the premium and the export rebate which themselves are not a real reduction in Government expenditure but additional taxation on industry.
The Government have tried and are trying to bring about additional deflation

through devaluation. Those hon. Members below the Gangway who thought that devaluation was an easy option can see that the Chancellor was always right; and the Government had better stop being disingenuous about it, or they will immediately undermine their own policy.
The country has now got devaluation and deflation. That is where the policies of the Government have led us. The Government have to hold back home demand to get extra capacity for the exports which later they hope to get, and there will be a difference of timing between the two. That is what the country will see this coming winter. It is what the measures of the 20th July were meant to do and which they failed to do.
I want to ask the Prime Minister about unemployment. Does he still stand by his statement of 20th July, 1966, concerning unemployment? I have repeatedly put to him the question whether he stands by his own statement and I want to read it to him again:
If the figure of unemployment were, after all the reabsorption, after all the redeployment and after the measures for regional distribution "—
after all those; not just a question of the first two and then later regional distribution dealing with it, but after all three—
to raise to a figure between 1½ and 2 per cent., I do not believe that the House as a whole would consider that unacceptable."—[OFFICIAL REPORT, 20th July, 1967; Vol. 750, c. 646–7.]
The Prime Minister constantly emphasises that he wants to run the economy with a greater measure of freedom of spare capacity. Does he stand by that quotation or not? Let the Prime Minister give a clear answer and then those who are now judging this policy will have the information on which to judge it. The result of the Prime Minister's last statement is that he wants unemployment in the South and the Midlands to be increased and unemployment in the rest of the regions diminished. Does he still stand by that statement of his attitude towards unemployment? 
Turning to the next statement of the Chancellor of the Exchequer, he said:
If there were devaluation in this country, any effort on the part of the organised workers to counteract it by securing higher wages would be ruthlessly resisted."—


ruthlessly resisted.
If the benefits of devaluation were to be secured we would need another incomes freeze in circumstances when prices would be going up fast.
This is what the Secretary of State specifically told the House last night that the Government would not do. Moreover, he gave no indication how they hope to influence wages or salaries during this period. So one of the essential elements in the Chancellor's diagnosis is missing and everybody will notice this when judging the effect of the Government's policy.
Moving on to the next point, the Chancellor said that the consequences were that
We should break faith with Governments and private citizens overseas.
That is precisely what the Government have done. They have broken faith and reduced the value of the sterling balances held by so many countries, including many of the poorer Commonwealth developing countries. It is a remarkable fact that most have not moved with us in devaluation. Zambia, whom we have been supporting now for so long to a considerable extent, has not found it necessary to devalue. Even Rhodesia has not found it necessary to devalue. We have broken faith with those other countries.
Now I come to the point where the Chancellor said that devaluation would be justified—[Interruption.] This is the Chancellor's own statement and I want to read it to the House. The Chancellor said:
It is true that there are circumstances in which a Government has no option but to devalue, namely, when internal costs and prices are so completely out of line with other countries that there is no other way of restoring a viable relationship. That is emphatically not the situation of Britain today.
Has it become the situation in the last four months? I do not believe that it has. The Chancellor was right in July, and that is still the situation today. Those are the only circumstances in which the Chancellor believed that it was right for him to devalue for the benefit of this country. The Chancellor's own words were:
That is emphatically not the situation of Britain today.
The right hon. Gentleman concluded:
Devaluation is not the way out of Britain's difficulties."—[OFFICIAL REPORT, 24th July, 1967; Vol. 750, c. 99–101.]

He was absolutely right. If the Chancellor had not given such an overwhelmingly powerful analysis of the consequences of devaluation and pointed to the fact that there was no justification for it, why has he done it? Why have the Government devalued? The country and the rest of the world must draw their own conclusions from what has been happening.
I believe that the Government have been influenced by external factors which have very largely caused them to lose their nerve. [Laughter.] Yes. They lost their nerve because of the opposition within their own party and they lost their nerve because of the effects of the by-elections. The hon. Gentleman the Member for Ebbw Vale (Mr. Michael Foot) made that clear yesterday when he said how glad he was that this change had been brought about because the Government were driving themselves into the election ditch.
They have tried to put on a bold face. They say that they rejected more deflation, but they are getting more deflation anyhow. They say that they rejected a long-term loan. But, as the President of the Board of Trade made clear yesterday, there is absolutely no evidence that they were ever offered a long-term loan. There is other evidence that they would not be able to get a long-term loan, because there is no confidence in the present Administration. There is no confidence, because their policies have failed and they are an incompetent Administration.
The pressure on sterling has been growing. The Chancellor must look again at this. The matter was handled with unbelievable ineptitude. First, there is the Swiss loan and the fact that this country publishes that it gets from independent Swiss banks just a small loan of about £30 million. What is the impact of that on the rest of the world, other than that the situation must be critical? 
The Bank Rate was put up in two ½ per cent. stages, but too late. It was not put up early enough because of the Labour Party conference. How would that have fitted in with the Chancellor's speech?

The Chancellor of the Exchequer (Mr. James Callaghan): When the Bank Rate


is either put up or put down, it is done after consultation between myself and the Governor of the Bank of England. Considerations of party conferences or anything else do not enter into that. I ask the right hon. Gentleman to withdraw that remark, because he has absolutely no evidence for saying anything of the kind.

Hon. Members: Withdraw.

Mr. Heath: The House can judge entirely from what the Chancellor says and from events.

Hon. Members: Withdraw.

Mr. Heath: There was then the muddle over the Basle loan to repay the I.M.F. The Chancellor says that he made his decision a fortnight before devaluation took place. Of course, he had to carry out some consultations, but what really held him back for a fortnight? That was a very expensive time indeed. What held him back? The usual indecision of the
Prime Minister. So the country had the ghastly loss of last Thursday and Friday. The Prime Minister is fond of saying that a week is a long time in politics, and it is; but the 24 hours between 4 o'clock last Thursday and 4 o'clock last Friday must be 24 hours of the most expensive time in British history. Everybody guessed from the Chancellor's Answer in the House on Thursday that there would be devaluation—except, of course, Lord Chalfont.
We had from the Prime Minister all the old excuses: the seamen's strike, the Middle East war, the dock strike—which, in any case, should never have been allowed to drag on—and even the 1964 deficit. If they were given their time over again—which heaven forbid—I wonder whether the Prime Minister and the now Foreign Secretary would really have handled affairs in the same way as they did when they came into power in October, 1964. The answer is, no. Do not they think that they would be in a stronger position today, without devaluation, if they had pointed out, as in fairness the President of the Board of Trade sometimes did at that time, the contents of the 1964 balance of trade, the build-up of stocks, overseas investment, and the growth in exports which followed in the next year? I do not think that any member of the present Administration

would argue that the great increase in exports in 1965 came from the action which they took in November and December, 1964. Perhaps if they look back on it they will realise that even their own position now would be stronger, and without devaluation.
The Government have had a great deal of good luck during the last three years. Let me tell them how. They have gained the advantage of a £250 million improvement in the terms of trade while they have been in power. They have gained by using up the stocks which were accumulated in our time, to the extent of £200 million. They have gained £450 million on those two items alone. That is good luck. In addition, they have liquidated the dollar portfolio and put it in the reserves, and these reserves, in turn, have been used up. They have used a large amount of swaps. We shall never know to what extent. We can only learn from external and other sources what that total is likely to be. They have liquidated other capital assets overseas, and they have limited capital investment, with the result that the country's position, instead of being strengthened, has dropped back.
All those items mean that the Government have used those resources, and in many cases have wasted them. The real reason why they have come to devaluation is that their policies have failed, and until the Government recognise this, the danger in the present situation remains, even after devaluation. That first long period of inflation up to March, 1966, won them the General Election, but it cost the country dear. The second spell of deflation, the compulsory freeze, was wasted time as well. The first was borrowed time, about the largest loss that Britain had ever had. The second was wasted time. There was a compulsory freeze and squeeze, and all of it was wasted. Now further time has been bought by devaluation, and it must be used, and used to very good purpose.
We have to accept that this has taken place, and the question is how this time is to be used. There seems on the Government benches to be no real sign of a change in approach or policies. There is no appreciation of why the policies adopted in the past have not worked. The real reason is that the Government find difficulty in operating an economy in


which a large sector is still in the hands of private enterprise. That is the fundamental reason.
There was a most dramatic illustration of that last Friday. On the day on which the country's reserves were pouring out, the Government made one announcement. At the time when it was decided to devalue, to reduce industrial costs, because that is what it amounted to, they announced more nationalisation of transport, and the imposition of an additional £37 million taxation on road transport, which will put up all our industrial costs. This indicates vividly the dichotomy in the thinking of this Administration. There will be time to discuss in detail many of the consequences, but I want to mention two or three today which are important.
First, there are the regional policies. There is no stronger supporter of regional policies than myself.—[HON. MEMBERS: "Oh."] I am prepared to take judgment on that for the time that I was Secretary of State for Industry, Trade and Regional Development. I am convinced that the growth point is the key to real regional development, and I suggest to the Government that they should again look at the question of using the resources which are available to provide the infrastructure for the development of industry, rather than hand out larger and larger subsidies to individual firms.
Another thing which is necessary—we were not able to do this in our time, and I hope that the Government will make progress with it—is a more accurate costing of individual costs and social costs of moving industry into different areas, particularly the grey areas, and the question of providing facilities for those who are in areas where industry is not at present going to find work elsewhere. It is time that we had a detailed factual analysis of unit and social costs so that regional policies can be developed in the best way.
Devaluation will make it 17 per cent. cheaper for American firms to take over British firms, or, for that matter, for European firms with the necessary currency to do so. This might have a considerable impact on the structure of British industry. It is 17 per cent. cheaper to buy a British firm today than it was last Friday. The Government must consider the implications of this, because they can be very great indeed.
I want, now, to say a few words about agriculture. The Prime Minister has always objected to the levy system of charges on food. Devaluation puts an automatic 17 per cent. levy on food, but whereas, under the levy system, the money goes to the Chancellor of the Exchequer, and can be used to reduce taxation, under devaluation the money goes to the supplier overseas, to the foreigner, and this is, therefore, far worse than the application of the levy system on the import of food.
The Chancellor and the Government must consider allowing British agriculture to expand more to meet our food requirements. But, more than that, our calculation is that the costs of agriculture may rise next year by anything up to an additional £80 million, and the industry wants to know as soon as possible what is to happen about the great increase in costs of feedingstuffs, fertilisers, fuel and taxation.
I come, finally, to deal with policy. Yesterday, I listened to many of the speeches made in the debate, and particularly to that of the hon. Member for Pembroke (Mr. Donnelly). When the hon. Gentleman said that in his view fundamental changes were needed, in addition to devaluation to produce an effective competitive economy, and proceeded to enumerate them as a change in the tax system, and a change in industrial relations, hon. Gentlemen opposite jeered. That indicated to me that there was no change in the thinking on the benches opposite. There has to be a change in the tax structure at all levels. There has to be a change in industrial relations, and in the legal basis for it.
I give the Prime Minister his point. I give it to him that I once said that industrial relations are human relations. They are, but all human relations take place in the context and the framework of the law, and when the law is changed human relations change, and human behaviour changes. I give to the Prime Minister the fact that in 1959, when I was Minister of Labour, there was a Motion on the Order Paper, signed by two hon. Members, asking for the setting up of a Royal Commission. I told the T.U.C. at that time why I did not want a Royal Commission. It was because I hoped that the T.U.C. would reform the trade union structure voluntarily. That


was 10 years ago, and it has not happened. The time has come when a change has to be made.
Social service financing has to be dealt with now in the context of devaluation. The money must go to those who need it, and not right across the board. There are hon. Members opposite who know this full well, but who are not prepared to put their party to the test at a time like this.

Mr. George Brown: Is the right hon. Gentleman?

Mr. Heath: I am, and I fought the last election on it.
Finally, Government expenditure, as the Chancellor has so often said, has got to be controlled, but he himself has never had power to control it in his own Administration.
Now I come to the Chancellor's own position. He has had many difficulties to contend with. He is the first Chancellor who has to contend with the Department of Economic Affairs and the variety of occupants there. He has had to contend—and I wish to be fair to him—with colleagues who, as the rest of the world knows, have been committed to devaluation from the beginning. He has been surrounded by people in the Government and by advisers from outside who, quite honourably, have put themselves on record as supporting devaluation, and the impact of this on world opinion should never be underestimated. This is one of the things with which he has always had to contend.
The Chancellor has made—and I am sure that he would not entirely deny it —many misjudgments from November, 1964, onwards and many miscalculations, but he fought manfully until last week to maintain the parity of the £. Throughout, he believed that he was right. I am certain that he was right and he must have full credit for it. He fought manfully and he fought in good faith.
I wish that I could say the same thing of the Prime Minister. Whenever anything successful happens, the Prime Minister, of course, claims it for himself, for the success of his party and the Government. Whenever their policies end in catastrophe, then, of course, it is a national emergency on which the Government should be exempt from all criticism.
The hon. Member for Birmingham, All Saints (Mr. Walden) spoke eloquently yesterday. He has been one of those, and has never hidden the fact, who has always believed in devaluation. He said:
I know and hon. Members opposite know … that this measure is absolutely crucial to my party, not simply in terms of the next election but for a generation."—[OFFICIAL REPORT, 21st November, 1967; Vol. 754, c. 1189]
That sums up the reason why the Prime Minister and his Administration have devalued the £.
The Prime Minister has learnt from his predecessors—from Ramsay MacDonald to put party before power and from Lord Attlee not to leave it too late before a General Election. That is why he has devalued the £ now. In his own words, devaluation is defeat. Let the Prime Minister honourably stick to his own words and tell the House that it is defeat.
If policies and attitudes change it can still be, to use the Prime Minister's own words, a springboard, but there is no sign whatever of a change in policies and attitudes on the other side of the House. There is a terrifying fear that it will be, in his own words, a slide. That is the situation which the Prime Minister has to face.
It is not the people of Britain who have failed. It is the Government who have failed the people. The Prime Minister's theme in the first election he won was, "Let's go". If he were to stand at that Box now and say, "Let's go", the people of Britain would rise with one voice and say, "And good riddance".

4.24 p.m.

The Prime Minister (Mr. Harold Wilson): The right hon. Gentleman the Leader of the Opposition will forgive me if I do not follow him in the tone and manner of his opening and closing remarks, but return to the real issues facing the House and the nation in this debate. The problem for the right hon. Gentleman is that, on Saturday night, he characteristically reacted to the devaluation announcement with a shrill outburst of instant opposition and now he is stuck with it. We will have occasion to remind him of it.
I do not intend to mix it with the right hon. Gentleman or with the right hon.
Member for Enfield, West (Mr. Iain Macleod) because, I assure them, insults


from both of them are a compliment to anyone on this side of the House. If all that the party opposite, in default of any policies, is left with is slogan chanting and graffite, then I am bound to say that they are amateurs. Even the right hon. Gentleman is an amateur compared with the Cambridge undergraduates who greeted me a few weeks ago.

Mr. John Farr: On a point of order, Mr. Speaker. Would the Prime Minister translate the last term he used?

Mr. Speaker: Order. That does not sound like a point of order to me.

The Prime Minister: I am prepared to give way to intelligent interruptions, but too many of them will make me a little loath to do so. The right hon. Gentleman, in his "Wilson out" campaign, is a tyro compared with the Committee of 100, whose campaign I see wherever I go. But at least the Committee of 100 means what it says.
We have from both the Opposition Front Benches competition in denunciation. But the right hon. Member for Enfield, West, like the right hon. Member for Streatham (Mr. Sandys), makes it only too painfully clear that his target for removal sits not in front of him, but beside him.
I do not intend, having listened to the Leader of the Opposition, to enter into the dialogue between him and my hon. Friend the Member for Buckingham (Mr. Maxwell). It was a very unequal contest. As the right hon. Gentleman knows, my hon. Friend knows what he is talking about because he has won the Queen's Award for exports. [HON. MEMBERS: "You gave it to him."] I did not give it to him and neither did you, Mr. Speaker. It was recommended by an industrial advisory committee presided over by His Royal Highness the Duke of Edinburgh.
I feel it necessary to reply to the very serious allegations by the Leader of the Opposition against my right hon. Friend the Chancellor of the Exchequer when talking about the timing of the Bank Rate increase. He accused my right hon. Friend of timing this for political purposes. That was his charge—an accusation of economic management for politi-

cal purposes; and that coming from the Chief Whip of Harold Macmillan.
But lest the right hon. Gentleman might think that anyone might take that remark of his about Bank Rate seriously, let him cast his mind back. On what date was Bank Rate put up by my right hon. Friend?—[An HON. MEMBER: "Ask Lord Cromer."] I am replying to the right hon. Gentleman, not to a speech in another House, which would be out of order—[Interruption.] All I can say on that is that some things which were said yesterday make it very plain what we had to put up with in our early months of office.
I am asking the right hon. Gentleman, since he made so much of Bank Rate timing, what date was the increase in Bank Rate? No? If the right hon. Gentleman does not know I will tell him. That is the trouble with having his speeches written for him. He said that it was manœuvred for political purposes. Bank Rate was put up on 19th October, right in the middle of the Gorton, Hamilton and Leicester by-elections.
My other anxiety about the right hon. Gentleman's speech is that, for the greater part of it, he seemed to think that he was winding up the debate of 24th July. All the time, he was quoting from my right hon. Friend's speech on that date, not realising that we are now debating the present situation. He talked like a Parliamentary Rip Van Winkle. He does not know what debate he is speaking in. I now propose to bring the House back to the realities of 22nd November.
I want to put the Governments case in this debate, the case on which we will divide tonight, and I will summarise it in five propositions. The first is that we were right to fight, and to fight for as long as we did to close the balance of payments gap which we inherited from our predecessors, and to fight on the basis of maintaining the parity.
The second is that we have done everything a Government could do to achieve a balance of payments surplus this year and, throughout these three years, we have done that regardless of the heavy price which we had to pay politically. We were prepared to do that, even with a majority of only three.
The third proposition is that the balance of payments surplus for which we


had fought; we had every right earlier this year, with full confidence, to expect would be achieved this year. We had reason in the spring to look forward to moving into surplus this year, 1967, and to achieving a substantial surplus in 1968, which would have meant a turn-round in our balance of payments from 1964 to 1968 of well over £1,000 million. But for the events of which the House knows, we had the right to expect this. However, I take the point that we cannot go on on the basis of being at the mercy of events of that kind.
Our fourth proposition is this—[Interruption.]

Mr. Speaker: Order. Honours are about even over noise at the beginning of the two Front Bench speeches. I think that we might now get down again to the debate.

The Prime Minister: Our fourth proposition is that, with the balance of payments weak, we were peculiarly vulnerable to speculation because of the nature of sterling as an international currency—not only an international reserve currency, but a world trading currency—and it is particularly important for Britain that the underlying position should be so strong that the gangrene of doubt about our currency cannot take hold and spread.
The fifth proposition is that, when the balance of payments surplus for which we had fought, and for which we have taken all the measures which we have, was ruled out, was no longer a possibility, for this year—or, on present projections, for next year—then, when these factors set off waves of speculation against us which threatened our ability to take the necessary measures to achieve and maintain full employment, to achieve an expanding economy, then, at that point and at that point only, it was right for us to say that the time had come for a basic change in the parity—

Sir Keith Joseph: But is the Prime Minister denying that imports had started to rise before the Middle last war, that the export increase had tailed off into a pattern, and that the expectations of the visible balance of trade had deteriorated seriously before any interruptions from abroad?

The Prime Minister: Not seriously enough to affect the estimates which we had made, because, as the right hon. Gentleman will be aware, imports were beginning to fall again—once one has allowed for the high cost of fuel imports because of Suez—in the autumn. Because of the docks strike, the trend of imports was quite sharply turned down in the third quarter. It is a fact that, because of the docks strike, it is very difficult for any of us to estimate the trend as a whole for exports and imports and it will be a month or two longer before we can.
Ten days ago, we faced this choice. We could no doubt have borrowed, but there could no longer be any question of borrowing to pay for our imports. To go on on the basis of short-term loans, however willing the international financial community might have been to make this possible, would have been irresponsible, especially if it were to involve strings and conditions that would have meant an unacceptable constraint on our ability to move forward as we have already begun to move forward to industrial expansion and full employment.
Since early autumn, there was no doubt that the economy was moving upwards. As I told the House last Thursday, on the basis of existing policies, that is, before devaluation, we could look forward to a substantial increase in production over the next year, well above the 3 per cent. which we had envisaged earlier. Unemployment, even without devaluation, would have been down to more acceptable levels a year from now.
The right hon. Gentleman asked me whether I stood by my statement of 20th July, 1966, about unemployment. Certainly I do, and can tell him, on the best estimates available to us before devaluation, that unemployment next autumn looked like being well within that 1½ to 2 per cent. bracket, as a result of what was already going forward.
Now, of course, with the opportunities of export-led expansion resulting from devaluation it is right to tell the House that the problem which we shall be facing in a year's time is far more likely to be not deflation and unemployment, but expansion to a scale which might lead to labour shortage in many areas—

Mr. John Biggs-Davison: The right hon. Gentleman said that the


Government were faced with a choice and that they could have borrowed rather than devalued. Is it the case, then, that the Government are not borrowing?

The Prime Minister: Yes, Sir, the position is, of course, that, when we devalued on Saturday it was the international monetary community itself which came forward with facilities to see the operation through. This is a very fair question. My right hon. Friend made it clear on Monday that we were not borrowing for the purpose of living on the sum borrowed, but that it was what might be called a deterrent, to make it absolutely crystal clear, if it was not clear already, that speculation at the new parity was not worth the gain—and with no strings. The loans from the central banks have no strings whatever, as was stated clearly on British television by Dr. Emminger on Monday night, in the same programme in which the right hon. Gentleman took part.
I have given the estimates of the unemployment trend on the basis of no devaluation and I have said what the dangers would have been of having conditions imposed when we might have had to halt this process of industrial expansion in its tracks. The events of the past three months—I am not seeking here to lay the blame on the Middle East or on docks strikes or on speculation, a great deal of it emanating from this country, as the right hon. Gentleman knows very well.—[Interruption.]
A good deal of this, it has been made clear in the public Press for a very long time, was being spread from this country, from the City, to a great number of foreign exchange dealers who thought it would be wrong to devalue, that there would be no question of devaluation, when all the time there was this insidious spread of political gossip from people in this country, persuading them that it was not so.
The right hon. Gentleman never used his authority to condemn it. In last week's Evening Standard, for example, there is an interview with a very distinguished Swiss banker who made an interesting comment—this is from a senior member of one of the biggest of the Swiss banks:

Once again, the most persistent doubts about the future of the £ have been originating from London rather than any foreign centre.
This confirms what other city editors said in July, 1966, that the gnomes of Zurich could not understand why our people in the City persistently tried to sell sterling short.
Whatever the effect of these past three months—there may be two interpretations, or more, about them in this House —the fact that these things happened means that it was right to make a fundamental reappraisal, not only of the country's economic strategy over these past years but more deeply, over the economic position of the country as we have known it for about 15 years. It just was not enough, as my right hon. Friend the President of the Board of Trade made clear yesterday, that we had succeeded in reducing our current balance of trade and payments, excluding capital payments, from a deficit of £400 million in 1964 to £18 million in 1966.
What we had to face this autumn, as right hon. Gentlemen have to face time after time when they were in office, was whether we could maintain, not for a few months only, but year in and year out, an expansion in production, and full employment, without again running into a balance of payments crisis. My right hon. Friend yesterday set out clearly the fundamental clash between industrial expansion and national solvency—how, for 15 years every boom had led to external crisis, each crisis worse than the last, every period of deflation led to a temporary easement, each easement more insecure than the last.
My right hon. Friend made clear, too, how more than once, and understandably, right hon. Gentlemen opposite were considering breaking loose from this dilemma by devaluation, how they rejected this devaluation, and how we supported them from the Opposition Front Bench in rejecting it. The right hon. Member for Enfield, West fairly quoted yesterday some of our statements in Opposition about devaluation. Even when our national solvency was imperilled by Suez, with which we profoundly disagreed, even then, we pledged our support from that Box to the strength of sterling.
When the right hon. Gentleman and again the right hon. Gentleman the


Leader of the Opposition this afternoon talked about morality I am surprised that the word did not choke them. The right hon. Member for Enfield, West hated Suez, knew it was wrong and immoral, and had not got the guts to resign—that is his morality. His Leader cajoled and bullied the back benchers into supporting not only an action which was immoral, but which was sold by the right hon. Gentleman to the House on a basis which we now know to be totally removed from the truth.
What we do not know is whether the right hon. Gentleman was himself deceived or was a party to the deception. [HON. MEMBERS: "Answer."] Some day he will tell us. [Interruption.] He must have been the best Chief Whip ever to be able to sell anything as immoral as that to a large Parliamentary party, not all of whom had forsaken their principles—they have a very good Chief Whip now.
As I have said that it is a 15—

Mr. Sandys: Does the right hon. Gentleman realise that his irrelevant debating points will not conceal the fact that he has misled and cheated the British people?

The Prime Minister: I thought that the right hon. Gentleman was in competition for the Leader of the Opposition's job, not for the Chief Whip's job. We are not taking, any of us, from the right hon. Gentleman, who was a member of that Suez Cabinet any rebukes about cheating or misleading. If the right hon. Gentleman wants me to return to what I was saying, I will do so. It is a 15-year situation, not a three-year situation with which last Saturday represents a decisive break.
I have talked about the difficulties right hon. Gentlemen met when they wished, on occasions, to break loose from it. Three years ago, when we took office, we faced the biggest deficit in our country's trading history. This is not denied. We had three choices before us on that morning of 17th October, 1964. There were three contingency plans which we found ready to be put into operation. They were, import controls, that is quotas, import surcharges and devaluation. En making the choice of import surcharges with all the difficulties that it created we were glad to have the sup-

port immediately of the right hon. Member for Barnet (Mr. Maudling), who said that this was a choice that he would have made. [HON. MEMBERS: "Where is he?"] I am sorry that he is away, too. Had his advice been available on Saturday night the right hon. Gentleman would not have been in the trouble that he now is.
The decision of October, 1964, not to devalue, to take the other course, was a conscious and deliberate decison. I believe that it was a right decision and that we were right to fight to maintain the parity, but the conditions which apply now did not apply then.
There was no spare capacity in the economy and there was then no general international acceptance of the case for devaluation, such as clearly emerged last Saturday. It is more than arguable, but I believe that action then, unlike last Saturday, might have ushered in an era of competitive currency devaluation which would have disrupted world values and world trading. We set out in 1964 to break clear from the dilemma of more than a decade by a policy of restructuring industry, of cutting out the waste in prestige aviation projects, and in tackling at the root the problems of such basic industries as shipbuilding, coal, steel and electrical engineering—and, at the same time, first, to ensure the survival, and then to ensure the increasing strength, of such growth industries as computers and electronics. That is not all that we set out to do in 1964.
We set out to make two nations one by bringing the depressed areas of the country into one economic community with the prosperous regions on the basis of full employment. We carried through far-reaching reforms in taxation aimed at ensuring—[Interruption.] This could be a matter for disagreement and indeed it was. We carried through far-reaching reforms in taxation aimed at ensuring that our national savings were concentrated more and more on investments in British industry, as opposed to investment abroad, and to ensure also that there was a new incentive within Britain to plough industrial profits back into new capital formation rather than to dissipate them in dividends.
This was right in economic terms. It was right in social terms and the Corporation Tax as well as the Capital Gains


Tax were essential instruments in creating a social background against which we could appeal for restraint and cooperation from the workers, to whom we appealed for greater production and for restraint in a sellers' market for labour—the background that right hon. Gentlemen opposite themselves always refused to create.
All this meant increasing taxation, and at every point we were opposed by a party which promises to increase every sector of public spending and at the same time to reduce taxation; a party whose whole philosophy is a combination of Paishism, Poujadism, with a dash of Powellism thrown in. But all we were seeking to do during this period, and it had to be an industrial approach industry by industry, required time. In the event, it became clear that this was denied to us. That is why we took the decision of last Saturday.
But all the measures we have taken in these three years will now stand us in good stead in facing the new opportunities for exports and for import saving —opportunities for agriculture as well as industry—and the challenges which last Saturday's decision has opened up, the reorganisation of shipbuilding, the reorganisation of steel, means that we are putting ourselves into a position where we are not only competing but now, in the export markets, can go over to the offensive.
The container revolution will help exports and shipbuilding alike in this new situation. Let me remind the House that a few more weeks of Tory rule and the British computer industry would have sold out to the Americans. Now it is already one of the most powerful industries in Europe, ready to seize new export opportunities given to it by this week's events.
For three years, again, we have continued to develop the competitive power of nuclear energy which, under public enterprise, leads Europe, and here, too, it gets from devaluation a powerful boost to its ability to develop its exports—and it will be our hope, particularly, that it will be doing this as part of the technological community of Europe for which we are working, itself a central element in our whole approach to Europe, to

which I believe that last week's decision will give fresh impetus and a new sense of opportunity.
These and countless other examples illustrate what my right hon. Friend the Chancellor of the Exchequer had in mind on Monday when he talked about the advantages of our new competitive situation. But he made it clear that we can only realise its advantages if by our internal measures we create a shift of resources from home consumption—and public expenditure—to the requirements of the export-led expansion, the requirements of import saving.
This package of announcements is not —and this is where the right hon. Gentleman is wrong—deflation, because the purpose is not to hold back industrial expansion—I do not think that there will be much doubt about industrial expansion once this export development gets under way—but to divert it into the channels that have now been opened up to us. That is the purpose of the measures.
Even before last Saturday's decision we were facing an increase in production such as we have not seen for several years. Once the seasonal problems of the winter are over, we shall be facing, as I have said, a reduction in unemployment. Now we have to ensure that the expansion into which we are moving is controlled, so as to avoid inflation, and directed towards the needs of our export industries and import-saving industries. The measures we have chosen, harsh though some of them may be, were chosen as being directly relevant to this objective.
Hon. Members have asked about cuts in defence. My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) did so yesterday. I should like him to know that these cuts of over £100 million are not, as I think he suspected, a stage army paraded by my right hon. Friend the Secretary of State for Defence every time defence cuts are needed. The cut is not what he called the Healey £100 million. These are new cuts and, again, they are relevant cuts, and the Services have made a big contribution to what is required in this new situation. But they are relevant particularly in the sense that they involve a release of productive resources—including research and development resources—for transfer from military


to civil use. As to what they mean, I give a number of examples now, and my right hon. Friend will give fuller details later. What it means for the Navy is a reduction in the numbers of Buccaneer aircraft now on order. We are advancing the phasing-out of H.M.S. "Victorious". There will be a reduction in orders of equipment for the Army, including ammunition, vehicles and instruments. For the Royal Air Force, the order placed in America for Chinook helicopters is to be cancelled—[An HON. MEMBER: "What about the F111?"] We are not changing that.
In overseas terms, we have decided not to proceed with the Aldabra project[Interruption.]—the establishment of a staging post in the British Indian Ocean territory As far as we can at present estimate, it should mean that expenditure next year will cut defence spending to the level which last July, with great difficulty, we had scheduled for 1970–71. It is an advance from 1970–71 to 1968–69— I think a remarkable achievement—

Sir Arthur Vere Harvey: In considering these cuts, has the Prime Minister taken into account the additional cost of the F111A and the Phantom aircraft?

The Prime Minister: I would rather wait for my right hon. Friend to complete his calculations, but as far as I can say, that has been taken into account—but whether fully to the extent we hope for, and look forward to, of a fall in next year's Estimates at 1967–68 prices, I should like to wait for my right hon. Friend to say. It would be better for my right hon. Friend in due course to make a fuller statement in the House than I can do now.
We are cutting public expenditure— including the capital outlay in the nationalised industries. There will be cuts in local authority expenditure. But while, in crisis programme after crisis programme announced by right hon. Gentlemen opposite, local authority housing, school building—and their mini-program me for hospitals—were cut, the housing programme, the school building programme, the hospital building programme, will continue to expand in accordance with the priorities we have laid down. And so will factory building in development areas.
We have made clear that while right hon. Gentlemen opposite—including the right hon. Gentleman the Leader of the Opposition, in the speech we have just heard—are baying for cuts in the social services, the main structure of our social services will remain intact and will continue to improve. We reject the Conservative doctrine that for the well-off even the bad times are good, and for the less well-off even the good times are bad.
We have made clear that while devaluation presents great opportunities for our exports, and a break with the vicious circle of these past years, there are severe costs to our people. I made this clear in my broadcast on Sunday when I said that
… imports will cost more, and this means higher prices over a period for some of our imports, including some of our basic foods.
There is a grave danger—a lot of people do not understand devaluation—[Interruption.] Remembering the tendency of the party opposite, who have not repudiated either the Post Office scare or the Zinoviev scare of some years ago—[Interruption]—and now we have the right hon. Gentleman the Member for Altrincham and Sale (Mr. Barber). [Interruption.] Knowing how easily right hon. Gentlemen opposite would have been prepared to say "This is a cut in your savings in the bank", knowing that many people thought that each £ note would automatically be 14·3 per cent. less in value, it was right to make clear that this was not the case.
I made this very clear. The right hon. Member for Enfield, West did not quote this yesterday. It was not given to him and he did not quote it. I have made very clear that over a period prices would rise, but there was not a 14 per cent. devaluation of savings last Saturday.

Lord Balniel: The Prime Minister said that a lot of people did not understand devaluation. I must say, having heard his broadcast, that is so. I think he will agree that following devaluation the weakest and poorest are the worst hit. He said in his broadcast that he would protect those who were most vulnerable. Clearly the
groups which are most vulnerable are the poorest of the elderly, and those living on small fixed incomes. What action is he taking to protect those groups who will be hardest hit?

The Prime Minister: The noble Lord is wasting the time of the House for I was coming exactly to that point when he interrupted. He has correctly described the people who will suffer from any economic crisis. They are precisely the people on whom right hon. Gentlemen opposite always put all the burdens. I will answer his question. We have said:
Because some rise in prices is inevitable, the Government will take, at the right time, the steps that may be necessary to protect he most vulnerable sections of the community from hardship. This will not be done by increasing overall demand, but by bringing about, in a non-inflationary manner, the required redistribution of purchasing power for the benefit of those who are worse off and who would otherwise suffer."—[OFFICIAL REPORT, 20th November, 1967; Vol. 754, c. 935.]
The House will be asked later to approve the provision we are making. I hope that we shall have the support of the hon. Member for Hertford (Lord Balniel).
From 9.30 last Saturday night we have made clear—

Sir Edward Boyle: Sir Edward Boyle (Birmingham, Handsworth) rose—

The Prime Minister: I am sorry. I have given way to too many unnecessary interventions which have prevented me from giving way to others who would have had something to contribute.

Mr. Heath: The Prime Minister has given the House a formula in very general terms about helping those affected, in a non-inflationary way. Can he tell the House what are the practical measures which are going to do this?

The Prime Minister: I have already said, and my right hon. Friend the Chancellor said, that the House will be given, at the right time, the proposals by my right hon. Friend the Minister of Social Security. The right hon. Gentleman will recognise when he considers the measures that might be taken, and measures which should be taken, the need for very intricate calculations both in relation to food prices and the impact of those prices on hard-hit sections of the community. It would be irresponsible at this moment without working that out to try to give the House advance information. I know the impatience of right hon. Gentlemen, I share it and the House will be told as soon as possible.
From Saturday night we have made clear that devaluation carries with it heavy costs for our people in the shape of rising prices—over a time for some of our basic foods, and indeed for other items, in the cost of living. This was emphasised in the Chancellor's statement on Saturday night. It was emphasised in my broadcast, and it was in the Chan cellor's statement on Monday. It has been in every speech made from this Box during the debate.
It is only right hon. Gentlemen opposite who have sought to elevate this into a propaganda scare. We have been realistic about it. We have related it to the necessary condition for our success in dealing with the new situation, namely prices and incomes policy. We have said—I do not know if they agree—that no price should rise as a result of devaluation except those which are directly affected by import costs. We intend to see that this is made effective. We shall see whether they back us in this or whether they are so besotted with unearned profits that they will back any who seek to take advantage of the situation against any action we are prepared to take against devaluation profiteers of this kind.
We have also said and I ask hon. Members opposite, not all of whom heard it, to ponder what my right hon. Friend the Secretary of State for Economic Affairs said last night, indeed all my right hon. Friends who have spoken—that increases in prices directly due to devluation, although inevitable, are far more limited than right hon. Gentlemen opposite suggest. Nor should there be a reason for wage demands and wage settlements which would have the effect of dissipating the advantage in export markets which devaluation has secured.
On the question of prices and incomes policy, above all while there have been disagreements between the two sides in the House, and within individual sides, there has not been any suggestion in this debate from any hon. Member about how this situation should be dealt with. [An HON. MEMBER: "That is for the Government to say."] Exactly, but right hon. Gentlemen opposite were the Government for a quite a long time. They failed to secure an incomes policy because they were unwilling to create the situation in which an incomes policy could be


accepted. Since we came to office they have opposed every measure that we have taken to secure restraint in prices and incomes and profits and dividends.
This afternoon we had a statement by one of their leading figures and propagandists. He is the author of the proposition that
an incomes policy is a nonsense, a silly nonsense, a transparent nonsense. What is more and worse, it is a dangerous nonsense, because the nation is invited to drug itself, as with a narcotic.
I should have liked to hear the right hon. Member for Bexley (Mr. Heath), instead of living on the 24th July debate, say whether he supports that.
The House will know that Saturday's decision involved for us a great deal of not only disappointment but anguish. We did not need to hear the past pronouncements which gave the right hon. Gentleman so much partisan glee to quote yesterday. I knew them all, but, once the moment was reached, it was a choice between carrying on the unequal fight for the old parity of sterling and the fight for full employment and everything to which all of us on this side of the House have been dedicated from the moment we entered public life. For me the decision was clear.

Mr. Jeremy Thorpe: Will the right hon. Gentleman tell us when that moment was reached? Could he tell us when the decision to devalue was within the general knowledge of foreign bankers? Is he aware that this was not answered by his right hon. Friend yesterday? There was an enormous withdrawal at least six or seven days before devaluation.

The Prime Minister: I am aware of the right hon. Gentleman's concern on this point. I understand that he has referred to it. I also understand that it is the intention of the Chancellor to deal with it when he winds up the debate.
Once that decision became clear that decision was made, and it was made—this must be on the record—unanimously by the Government.
Once that decision was made, not only we but the House and the nation can recognise what is involved in this re-appraisal. What is involved is this. It is a break with the constrictions and constraints of 15 years, if we make it so. It means that pro-

vided we—all of us in this House, all in industry, both sides of industry, are prepared to respond to the challenge with which we are presented, Britain can break free from a situation where we could not under any Government—theirs or ours—move forward to sustained expansion without relapsing into crisis.
This is the challenge to this House and the nation. The right hon. Gentlemen opposite have made it clear that they are not prepared to rise above a partisan rejection of the action we have taken. Do they accept that we were right to devalue or not? [Interruption.] There is going to be a vote tonight. Do they accept that we were right to devalue? It was not clear from 50 minutes of the speech of the Leader of the Opposition this afternoon. If they agree that we were right, not only the tone of their speeches but their vote tonight will be —even by their standards—an unparalelled exercise in political cynicism, the more so in that in this debate and all their public comments they have not put forward a single constructive proposal.

Sir Harry Legge-Bourke: I am grateful to the Prime Minister for giving way. My right hon. Friend particularly asked the Prime Minister to say something about what the Government are proposing to do about agriculture. There is a need for a crash programme to restrain imports.

The Prime Minister: I am grateful to the hon. Gentleman. I do not want to delay the House much longer. Last weekend, my right hon. Friend the Minister of Agriculture, Fisheries and Food, other Ministers concerned, and I were engaged on seeing what now should be done immediately, particularly in relation to the Price Review. This was a question asked by the right hon. Member for Thirsk and Malton (Mr. Turton) on Monday and answered by my right hon. Friend the Chancellor of the Exchequer at that time.
I thought that the hon. Gentleman rose to answer my question as to whether the Tories supported or rejected devaluation. We have not had an answer yet. If they were to support it in their hearts and then vote in the Division Lobby against it, this would be, as I have said, a very cynical act. If they reject devaluation, it can mean only one thing, or one of two things. We intend to wrap this one round


their necks. If they reject devaluation, it means that their policy is either deflation, which on occasion they have advocated, or a dependence on borrowing, which would involve turning our backs on economic advance and would mean, equally, imperilling the rights of this House to determine this country's policy. Nothing we did in last Saturday's operation involves any of that. We should be told by tonight whether they reject devaluation. [Interruption.] Every time I put a question to the Conservatives, all I get is this noise.

Mr. Selwyn Lloyd: Does the Prime Minister accept that the consequences of devaluation will be as described by the Chancellor of the Exchequer on 24th July?

The Prime Minister: I have said what the consequences will be. My right hon. Friend the Chancellor of the Exchequer himself answered that very question in his statement on Monday. He said exactly what that statement of 24th July meant, and he said what measures were to be taken by the nation to mitigate the serious consequences which are always involved in a decision of this kind. I still have not had, even from the Leader of the Opposition, any answer to whether they really oppose devaluation or support it. What I strongly suspect is that they privately accept devaluation but are hoping to cash in on the unpopularity of some of its implications. No doubt they will at some point explain themselves.
I make it clear: we have made our choice. It will be a hard road, but our decision is for expansion and full employment. If they reject this, they are not only rejecting devaluation. They are rejecting the opportunities it gives for expansion and full employment, and they are rejecting the right of the House and the nation to determine the economic future of Britain and its place in the world.

Several Hon. Membersrose—

Mr. Deputy Speaker (Sir Eric Fletcher): Mr. Speaker has asked me to say that, thanks to the co-operation of hon. Members yesterday, the Chair was able to call 19 hon. Members to take part in the debate. There are still some

60 hon. Members wishing to take part and hence the desirability of brevity will be obvious.

5.15 p.m.

Mr. David Lane: Particularly in this rather excited atmosphere, I hope that I may ask for the usual indulgence of the House towards a new Member addressing it for the first time. May I say also how grateful I am for the friendliness and helpfulness of hon. Members on both sides and of the officials and staff of the House which I have enjoyed during the short time I have been here. Whatever else in the habits of the House we may change in the years ahead, I hope that the warmth of its welcome to newcomers will always remain.
I regard myself as fortunate to have known personally both my immediate predecessors as Members for Cambridge. Sir Hamilton Kerr served Cambridge faithfully for 16 years and was a highly respected Member of the House. Robert Davies, who defeated me at the last General Election, had served for less than 16 months when he died in June. As political opponents we disagreed, often violently, but we remained friends. He was a man who cared passionately about the causes in which he believed, even to the point of parting company with his own Government. He was also a man who cared passionately about the many individual constituents whom he tried to help, and he never spared himself in working for Cambridge. I know that Hamilton Kerr and Robert Davies regarded it, as I now regard it, as a very great honour to represent Cambridge in Parliament.
I shall not inflict on the House any kind of word-picture of Cambridge, but I want to stress two points which are not irrelevant to this debate. First, Cambridge as a whole is unique, yet its problems are similar to problems found in many other constituencies. Since the war the new has been rising steadily alongside the old, yet much remains to be done. We want to speed up the building of more homes and the replacement of old schools. We want to get on with city centre development. We want to expand the road programme. This is an issue on which I hope to breathe hotly down the neck of the Minister of Transport on another occasion. All these depend on


the progress of the economy. Unless Government policies succeed, our hopes will be frustrated.
Secondly, I should like to see a still greater contribution by the university to the life of the whole city—the industrial life, the cultural life, the wise use of land. What is true of Cambridge is surely true of the whole country. If Britain is to regain its strength and prosperity in the future, the universities must be involved more closely in the mainstream of our national life, particularly in the development of industry. Someone who has a foot in both the academic and the industrial camps said to me the other day, "The technological universities should be centres for technological exploration rather than centres either for producing technicians or devoted entirely to the study of basic research". 
Mr. Deputy Speaker, I am glad to have caught your eye this afternoon, because of the feelings of many constituents of which I was made aware during the weekend. Several times on Sunday my telephone rang. I was telephoned by people anxious to let me know how concerned and worried they were about devaluation—an electronics engineer, a builder, a professor of chemistry, and a normally mild housewife who wanted to know how she could start a campaign of protest in Cambridge. This is some measure of the shock that people have sustained and which my right hon. Friend the Leader of the Opposition emphasised this afternoon.
I am sorely tempted to take up some of the points which were made last night in that terrifying speech by the Secretary of State for Economic Affairs, but if I am to remain reasonably non-controversial I had better resist the temptation. Instead, I should like to say something about the rôle of industry after devaluation and to support several of the points that were made by other hon. Members yesterday.
Before entering this House I worked for several years in industry, first in steel and latterly in an international oil company. I know that industry will not fail to play its part in the national effort, provided it gets proper stimulus and encouragement from the Government.
It is on that that I want to make three brief points. First, about the nationalised industries. We all know that their performance is vital to the whole economy and that there is ample room for improvement in it. Given the cut-back in capital expenditure, have the Government any fresh proposals for securing that improvement? In particular, when may we expect an end to the uncertainty that at present surrounds British Railways? 
Secondly, about the export drive. As well as the automatic advantage of devaluation I hope that, despite what the President of the Board of Trade said yesterday, the Government are still not satisfied with what they are doing to help exporters. For example, what about a simplification of Customs procedures? What about further improvement in the E.C.G.D. arrangements? Cannot more be done for firms which are providing export services, one of which, as hon. Members may have read, made this cri de Coeur in a letter to The Times not long ago:
We get no credit for exports, no tax relief, no rebates, no chance of a Queen's Award and no thanks from anyone. Small wonder that few British firms can be bothered with desperately needed export business.
My third comment is about the whole attitude of the Government, for this is at the heart of the present crisis of confidence in industry. Surely what industry needs is helpful deeds, not soothing words; positive encouragement, not negative restriction. Yesterday the President of the Board of Trade seemed to sneer at the importance of incentives, and I hope he will talk a little more about this to businessmen. I hope, too, that the House marked the wise words yesterday of the hon. Member for Edmonton (Mr. Albu) about the folly of increasing taxes and of ill-advised intervention.
There has been a great deal of talk about sacrifices. I believe that nothing is more urgent than the sacrifice of some of those sacred cows which too many hon. Members still cherish—for example, their suspicion of private enterprise and their hostility towards overseas investment. I fear that the morale of industry will remain low, and the response of industry will remain lukewarm, unless the Government respect private enterprise as the main creator of national wealth and accept profits, if they


are properly and competitively earned, as a mark of efficiency and not an object of envy.
This Motion invites the House to approve the statement of the Chancellor of the Exchequer. By implication we would also be approving the whole sad saga that ended last Saturday, and that I cannot do. This is a gloomy occasion on which to be addressing the House for the first time, but there is one gleam of light. More and more people, both in Cambridge and throughout the country, are determined at the first opportunity to return a Government who will again conduct our national affairs with competence and with integrity.

5.25 p.m.

Mr. Frank Tomney: The hon. Member for Cambridge (Mr. Lane) has delivered his maiden speech and it falls to me to congratulate him upon it. He has chosen to do it on a day when the House of Commons is at its most boisterous. In this respect he has been lucky, though in some other respects unlucky. It must have been an unnerving experience for him to have to sit and wait for two long hours before he got the chance to deliver his maiden speech. But, having delivered it with great clarity of thought and with not a little expertise on issues on which both sides of the House could find ready agreement, we shall look forward to hearing him on other occasions giving us the benefit of his undoubted knowledge.
I should like to pay a special tribute to the manner in which the hon. Gentleman graciously referred to his predecessor, a man on these benches whom some of us hardly got to know before he died at an early age. This House appreciates sentiments of that character. This House has its own atmosphere and its own courtesy. The hon. Gentleman so expressed himself that he lived up to its highest traditions. On behalf of hon. Members on this side of the House and, I believe, on the other side as well, I should like to thank him personally.
I sat here all day yesterday listening to the debate. I am not an expert on this matter; I do not think many hon. Members are. Many claim to be. Some are devaluers by conviction. Many are

devaluers by accommodation. The accommodation has quickly come about. It passes the comprehension of ordinary logic that successive supporters over the years of a policy of no devaluation, supporting it, in the Lobbies with their votes, when suddenly confronted with devaluation, support it with just the same will. This needs a lot of understanding.
I claim no expert knowledge. My hon. Friend the Member for Birmingham, All Saints (Mr. Walden) was able at long last to get off his chest in a brilliant manner what has been there for a number of years. I shall refer to him again later. I am not sure whether this policy will work out. Nobody knows. But my hon. Friend the Member for All Saints said something which is very germane to this subject. He said that on this issue of devaluation, this party, having taken the decision, was virtually untried. The effects of this devaluation will be felt by the party for good or ill for more than a decade.
This can probably be expressed in a better context. As one who is the holder of a dog licence, if this policy fails I do not want to find myself without a kennel. In those terms that is what this policy means for British politicians and political parties this is the biggest change in this country's fortunes that we can envisage. There has been no situation like this. The 1949 devaluation was not like this. It could not have been. It was in another age. Marshall Aid at that time was not in full gear. Since that period, other nations—France, Italy, Germany and Japan—have become competitors in price, delivery and service, and in some cases quality, and this poses a serious threat to our industries. It is a threat which we should have to meet with or without devaluation.
After the speech of the Leader of the Opposition on Monday evening on television, a certain wariness crept into the Opposition's view about the support which they felt obliged to give to devaluation. It may work all right, but there is no guarantee that it will. The competition which we shall have to face as a result of this 15 per cent. devaluation, which some economists believe is not the true figure—they think that 30 per cent. is more like the true figure—is a measure of the job which we have


to do. We start with a 15 per cent. impost, which means that we have to earn 15 per cent. more before we start breaking even.
The weight of the responsibility will fall, once again, on the working class and trade unionists. It will be their job more than anybody else's to accept the penalties and responsibilities and to forgo their just wage demands in an effort, once more, to put this country into such an economic state that future prosperity is guaranteed. In 1966, the T.U.C's vetting policy did not go down very well with the unions. Now they are being asked again to bear the burden.
I am one of a diminishing number of Members on this side of the House who has had experience of factory bench working, who knows what it is to punch a clock card, who knows what type of conversation takes place on factory floors, who knows what the men talk about, who attended meetings after work in draughty halls forming and negotiating on wage claims and who picketed the factory gates. We are fully conscious of our responsibilities not only to the Government but to the nation and the trade union world. Again we are faced with asking workers to forgo what they regard as their just demands.
Devaluation, if it succeeds, can be expansionist. If it is expansionist, it will be inflatory. But it must be deflationary to succeed, and then the prospect of unemployment will face the workers again. This is quite a basinful to put on the trade union movement. The weekly wage earner, who does not have the benefit of tax avoidance or tax evasion—the authorities take the money from him before he gets it—cannot adjust his earnings. People in the salaried professions who are leaving this country in abundance because salary rates are neither proportionate nor adequate to the amount of study that they have devoted to getting their degrees are, apparently, the backbone of this new export drive. The question is: can it succeed? 
I am astonished that people can say with easy asurance that it can succeed. Knowing industry as I do, I wish that I could say that it will succeed. If it was right to devalue on this occasion, then it was right to devalue in 1964. If we had done it then, we could have, rightly, put

the need for it on the shoulders of right hon. and hon. Members opposite and been re-elected without much difficulty. This debt was round the nation's neck. The books were not seen until the Labour Party took office.
As the Prime Minister said, stop-go conditions have been operating for 15 years. It is no joy to me to read in the newspapers that French banks, hotels and business houses are refusing to accept cheques in excess of £10. The penalty of devaluation is that sterling is no longer a reserve currency; it has cancelled itself out. I know that people will send money here if they can earn high interest rates. But if they earn high interest rates we shall be in grave danger of following the same road on which we are now.
I listened to the whole of the debate yesterday, and I am trying to introduce into the debate a new note about where the real responsibility lies. The capacity of British industry to compete on these terms is open to conjecture. This debate is all conjecture. It is on a very narrow point—whether we accept devaluation. There are divisions among hon. Members opposite on this point individually and collectively, and there are some divisions among my hon. Friends individually and collectively.
The 1949 devaluation led to a boom period up to 1951. The Tory Party took office in conditions of world upswing and world demand. It was at that time, perhaps, that the long-term plans for the retrenchment, retooling and refurbishing of British industry should have taken place, especially in heavy industry and durable goods. Time and again we debated in the House the level of investment in industry. Those were the fat years of full employment, runaway inflation and over-heating, when, money was made easily and spent just as, easily.
Then the pattern of trade changed against us. In areas in which we were formerly supreme we are now second. To the astonishment of everyone, Japan—an island as big as ours and with the same population problems—with the help of American aid, became the second industrial competitor to the United States after the war. By any assessment of the facts, when one looks at the charge on resources, and especially the social services, we have in this country a population ratio


probably the same as the ratio in which we devalued the currency—about 15 per cent. This population ratio, in an age of automation and job displacement, will pose a very difficult problem.
Our industrial structure is changing every day—mergers, more efficiency, financial arrangements, agreements within mergers, inter-continental and international financial company arrangements. If we do not get into the Common Market, British firms will take their capital and jump the barrier. All these things will have an effect on our industrial capacity. How do we prepare British industry for this fight? Can it cope? What type of goods are we to sell—consumer goods, durable goods or capital goods? All our competitors can produce consumer goods in the same volume as we can. Our capital lead has been whittled away, chiefly by Germany and Japan. We probably have a lead in durables due mainly to our scientific and technical progress and invention—a lead which will not last. Here we lead the United States.
The type of problem posed to us requires continuous, 24-hour shift working in some industries. How shall we do this? How shall we move people from centres of population to centres of capital to man factories for all those hours without houses or schools as a means of inducing them? They will have to receive premium payments, according to trade union agreements. The short answer is that it cannot be done. This is a marginal effort from the start, and that is what makes me a little fearful of the outcome. I am as much concerned with the nation's progress in the future as any hon. Member opposite. The country must go ahead. We cannot expel 15 per cent. of our population or force them to emigrate. They must be fed, looked after, schooled, given employment and have their future assured.
For the first time for many years we have now put our financial system at risk. I listened with a great deal of admiration yesterday to my hon. Friend the Member for Birmingham, All Saints, a knowledgeable man whose speech was well delivered and with great coherence. But he made one statement which seemed to me to introduce a note of dubiety into his whole argument. To paraphrase what he said, if he had to choose between the

economists and the financiers, he would choose the economists every time. I do not know if there are more bankruptcies among economists or financiers. It would be a point for somebody to investigate. What I do know is that the Hungarian rhapsody has gone very seriously off key. The fiddlers have flown to the roof of Number 10 and the £ has dropped to the bargain basement. This is not a happy situation.
The City too has been changing. Let us consider some of the companies and the people now taking charge of industry and restyling it, how it has been done and what the net result might be. I make a habit of buying one book a month, but last month I bought two. One was the report of the committee investigating invisible earnings, and the other was a property book. I enjoyed the property book more. I did not understand the other, and I defy anyone who is not well versed in statistics to understand it.
In most books there are one or two facts which seem to stand out, and one of the facts that the report has unearthed was that from 1792 to 1961 this country had a surplus on its visible balance of trade in only five years, two of which were 1955 and 1958. The rest of our earnings have resulted from "invisibles" by the City and the Bank of England. That is a remarkable fact. Because of it, I am a little timorous when people condemn financiers in favour of economists. The House of Commons benches are littered with economists and lawyers —over-employed and over-valued, often wrong and seldom right. When they are right, there are always qualifications on the reasons. The House occasionally produces men of greatness and genius. I wish that at the moment it had such a man who could tell us with certainty what the effect of devaluation will be in the next 10 years. I am afraid that there is none available, and I say in all humility that I do not know.
But I do know that fortunes are made and will continue to be made. If I could make one I probably would not be standing here. [Interruption.] I know that it is a moot point whether there are more millionaires on this side of the House or on the opposite side. With the release of building licences in 1954, colossal sums were made from the property speculation boom. I think that the right hon.


Member for Flint, West (Mr. Birch) was the Minister who then surrendered the licences. Overnight, with no other expertise but knowing whom to contact and where the estate agents were, people made large sums. In the case of the Euston scheme, £27 million was made from one project and a profit of £22 million was common on a project. That was all national wealth. Much of it should have accrued to the Government, but it has been lost for ever and cannot now be reclaimed. The rent arrangements with the London County Council, which should never have been made on a fixed rent for 150 years ahead on square footage, resulted in a net loss to the L.C.C. of £12·9 million. That is fantastic.
It used to be said about American gangsters in the 1930s when they went into business, "They have now gone legitimate." They have gone legitimate in Britain, going into industry and bringing their money and expertise with them. It is instructive to watch the change that has taken place and how it is being done. They alter employment, turnover and exports, and, although their personal fortunes may have been made through the height of financial obscenity, they will have done the country some good. Nobody will be able to rid me of the idea in future that the financiers have not proved themselves just as wily or important as the economists.
I promised not to speak for long, and to try to find something new to say. In my simple W.E.A. economics way, I see devaluation not succeeding unless we have deflation. If we have deflation, we shall have unemployment. If we have new streamlined industries which are more powerful and efficient there will naturally be displacement of labour. I worked with the General Electric Company as a glassblower just at the time when Mr. Weinstock took over. Apparently he is a dynamo and an expert—a shrewd, tough, hard, calculating business man. I was in the lamp and valve factory, and I know what happened there. It was split up into different companies, and if one had 33 years' service towards a pension one was told, "Sorry, but we no longer have any use for you". Such are the human penalties which come with efficiency. That is what hits the people down below, who must be given all the

protection we can afford for the poorer section of the community.
But if we are a responsible Government we must also afford protection to the person climbing the ladder who is paying a heavy mortgage and has a wife and children. The present interest rates will not help. I do not say that Bank Rate will stay at 8 per cent. for ever, but if it is to attract money to this country after the loss through devaluation it must remain high. Its effect goes right through the structure of industry and everything else.
The nation needs people who have the capacity to do the best for themselves and look after themselves as much as any. We rely on them and the unions, and the times ahead will not be easy. If there is to be a sight of easy profits or inflation I shall be on the side of the people I have represented for a long time—the trade unionists.
If there is any sign of people getting away with profits and gains while inflation is working its way through the economic system, some of us are prepared to put the case for the unions very forcibly. We owe this to ourselves and to the people with whom we have not only worked alongside but been brought up. I can only say probably what most have already said before me. If devaluation succeeds, well and good. If it only half succeeds, well and good. But if it fails, then a bleak future indeed is facing us.

5.50 p.m.

Mr. John Boyd-Carpenter (Kingston-upon-Thames): I join with the hon. Member for Hammersmith, North (Mr. Tomney) in tendering my congratulations to my hon. Friend the Member for Cambridge (Mr. Lane), upon his most admirable maiden speech. Perhaps I may say, in parenthesis, as an old friend of Sir Hamilton Kerr, that it is nice to be able to use again the words "my hon. Friend the Member for Cambridge". However, I would join in expressing the sympathy that my hon. Friend expressed with his predecessor and his predecessor's family in the very sad and unhappy events which produced the by-election which my hon. Friend contested.
I think that the House as a whole must have infinitely preferred the tone and the


content of the speech of the hon. Member for Hammersmith, North, to that of the Prime Minister. One could hardly have a more vivid contrast in tone, substance and approach. The Prime Minister, when he undertakes the, I think, rather disagreeable task of reading in HANSARD the speech that he made this afternoon, will be able to reflect that if he complains that this matter is not being dealt with in an unpartisan manner he hardly did his best to secure that it should be. I have never heard in my experience in this House a speech so utterly unworthy both of the occasion and of the great office of the Queen's First Minister as that to which the right hon. Gentleman treated us this afternoon.
Those of us who study the right hon. Gentleman's technique know very well how he behaves. If he has a good case and a powerful argument he is urbane, reasonably prepared to give way on small points and a most effective debater. When he knows he is in a corner and has a thoroughly bad case he lashes out with personal, offensive references and wholly irrelevant historical allusions and does everything he can to distract attention from the main issue.
I do not propose to say anything about his highly offensive references to a number of my right hon. Friends—they are more than capable of dealing with the Prime Minister themselves—but I must say how deeply I resent his offensive and wholly ungrateful references to Lord Cromer. Anyone who has studied the history of the autumn of 1964 or the summer of 1965 will know how much the present Government owe to the noble Lord. They will know how in November and December, 1964, the present Government made their first and perhaps most dangerous onslaught on public and business confidence. It was Lord Cromer, with his experience and contacts with other central banks, who set on foot the action which saved the Government from a very early collapse. For the Prime Minister, speaking from the Dispatch Box, to make the kind of reference that he did to the noble Lord shows how much the right hon. Gentleman has degraded the standards of public life.
The Prime Minister's speech was wholly inadequate in a whole number of ways. Indeed, I do not think I overstate it when

I say that it was nearly as bad as his broadcast on Sunday night. But at least he did not today, as he did on Sunday night, try to suggest that devaluation was a great triumph of Socialist policy for which the Government had been working hard these last three years, though there may be an element of truth in the latter part of that conception. The Prime Minister talked, rather curiously, about breaking out of a straitjacket, regardless of the fact that these rather outmoded garments are worn only by dangerous lunatics who are dangerous to the public when they get out of them.
What nauseated me most about the Prime Minister's broadcast, as, indeed, about his speech this afternoon, was that on neither occasion did he make the faintest reference to the fact, or give the slightest indication, that he appreciates what this decision means to those countries which trusted us by keeping their reserves in sterling. I think that it will be within the recollection of the House that he did not mention them this afternoon. I have studied the broadcast, and the Prime Minister did not mention them there. It is a shameful thing, because there are a number of countries, particularly perhaps the small emerging African ones, which have shown confidence in us by keeping their precious reserves here in sterling and are now being fined 14·3 per cent. because of their faith in us. It would have been bad—

Mr. Maxwell: Mr. Maxwellrose—

Mr. Boyd-Carpenter: The hon. Gentleman's earlier interventions do not actually stimulate me to give way at this stage, though the exercise of rising in his place no doubt does him good.
It is quite astonishing that the Prime Minister should regard it as unnecessary to mention the fact that we are, to put it bluntly, bilking those countries of 14·3 per cent. of the money which they entrusted to us. The only attempted defence of this was made by the President of the Board of Trade yesterday when he said, "Oh, well, it is all very well; they have had high interest rates." It ill-becomes a debtor whose bad credit has compelled him to pay high interest rates to adduce that as an argument for going back on the repayment of the principal. I beg those who dismiss the idea that this is a moral issue and regard it


as a coldly technocratic economic decision to realise what they are doing to countries whose only fault was that they trusted us instead of keeping their balance in dollars or Swiss francs.
I should like to hear from the Chancellor of the Exchequer, when he replies tonight, what is to be done to compensate at any rate the poorer of those countries for these losses. I think of one country that I know, Malawi, a very small country developing currently on a very sound basis. It has kept its reserves in this country. It has now had 14·3 per cent. knocked off them. Is there not a moral obligation on this country to do something for that country if we regard it as being for our convenience to alter the value of sterling? 
As to the rest of the Prime Minister's speech. I think that we can very well leave the public outside to judge. There was, however, one extraordinary observation on which I must comment. The right hon. Gentleman said that the Conservatives would prefer deflation and living on borrowed money to devaluation. Who is talking? What have the Government been doing during the last three years except precisely that? It is part of the Prime Minister's curious technique that on this sort of occasion he charges us, as though it were a terrible thing, with doing precisely what his own Government have been doing for these last three years.
Almost as bad was the Secretary of State for Economic Affairs who, in his lecture to us last night, suggested that there was a choice between devaluation and deflation and who said, rather primly in his rather prissy manner, that, of course, the Conservatives would always choose deflation. There is no choice. What the Government are presenting to us—and the Chancellor told us this on 24th July—is devaluation plus deflation. A wholly false alternative was put, and unless the House recognises, as the Chancellor frankly told us on 24th July, that the inescapable result of the Government's decision is very severe deflation, then this discussion will not have served any very useful purpose.
When right hon. Gentlemen opposite twit us with wishing to introduce deflation, we must ask them what an 8 per cent. Bank Rate is for, what hire-purchase restrictions are for, what the squeeze on

the banks is for and what increased taxation is for? Every one of those is a classic method of securing deflation, except that it is a very long time since any Government of any colour has thought it necessary to go to 8 per cent. for the Bank Rate.
Therefore, let us clear our minds of any suggestion of a clash between the Socialists getting out of their straitjacket into devaluation and the Conservatives clamouring after deflation. There can be no successful outcome from the present situation unless in fact the Government peservere with the deflation which they have said they will have.
But the crucial question, as the House knows and to which the hon. Member for Hammersmith, North very feelingly referred, is that of wages and incomes policy. I recall that on this subject the Chancellor said in the debate on 24th July:
If there were devaluation in this country, any effort on the part of the organised workers to counteract it by securing higher wages should be ruthlessly resisted. If the benefits of devaluation were to be secured we would need another incomes freeze in circumstances where prices would be going up fast." [OFFICIAL REPORT, 24th July, 1967; Vol. 751, c. 100.]
Is that true? Do the Government stand by that? If they do not, what has changed since then to alter it? I understand that the Chancellor of the Exchequer is to reply to the debate, and I hope that a note of these questions will be taken by
the Chief Secretary. I hope that the Chancellor will answer these questions. Is this still true? If it is still true, do the Government intend to do this? Do they intend ruthlessly to resist —that, of course, means with the backing of legal powers—any attempt by the organised workers to counteract the effects of devaluation?
We must know whether what the Chancellor, with all the authority of his great office, told the House on 24th July, now that the circumstances to which he was referring have actually arrived, is still the policy of the Government. If it is
not the policy of the Government, why not? We must be told, because, unless the conditions which the Chancellor himself declared to be necessary are in fact applied, does anybody think that foreign confidence will be restored after even a few weeks have passed.
And does the House really think that persuasion will produce the results? The trade unions—and I have great sympathy with them—were extremely restless last year at the idea of even keeping earnings level. Is it the Government's view that they will quietly acquiesce in a substantial reduction in the real value of earnings? If wage rates remain as at present —and I do not want to quote the Chancellor again, because his words are in the mind of every hon. Member—that necessarily involves a cut in real wages. Is it the Government view that the cuts in real wages will be accepted by the unions
without resistance and without their trying to counteract it? If so, given our past experience, perhaps the Chancellor will tell us tonight why it is so. This is the crucial and central point.
I want now to refer to public expenditure. The House may remember—certainly, the Chief Secretary will—that in the debate on 24th July I begged the Government to make economies then, and I was told merely that the Estimates were being reviewed. If the Government had acted then, this situation might not have developed. At any rate, they tell us that they are now forced to make economies. I should like to know what they are. In his statement the Chancellor said that there would be cuts of £100 million, including in investment by the nationalised industries. How much is to be from investment by nationalised industries and how much from current expenditure? What items of current expenditure are to be affected? 
I do not think that those are unreasonable questions. We have been given a precise figure of £100 million and Ministers do not give those figures unless they are the sum total of items which they have definitely decided. [HON. MEMBERS: "Oh."] Perhaps I am thinking of a former Government. But surely, if the House is to be given the total of £100 million, it is entitled to know what these economies are.
What of the saving on defence? As far as I know, there has been no reduction in commitments. In the defence debates last summer, we were told that the cuts already envisaged went as far as they could without reducing commitments. Where is this £100 million to be found without reducing commitments? The

Prime Minister referred to Buccaneer Aircraft and Aldabra, but those were things which the Government themselves thought necessary this summer to meet commitments and the House is, therefore, entitled to be told what has changed to enable those commitments to be met without the provision which only a few months ago the Government themselves thought necessary.
The general package which comes with devaluation is the mixture with which we are only too familiar, the ordinary methods of securing deflation to which I have referred, but I want to take up two of them. The first is the increase in Corporation Tax. When he made his statement on Monday, I asked the Chancellor how he thought that this would help to increase exports. The House knows that Corporation Tax falls with particular severity, because of its structure, on companies trading overseas, precisely the companies on whom we rely for increased exports. These companies will already have to carry the withdrawal of the rebates and the withdrawal, if they are manufacturing companies, of the S.E.T. premium, and yet, at the same time, the Chancellor is seeking in this way to make it even less profitable for them as well.
I can summarise his answer by saying that he said that they would get more profits and it was, therefore, reasonable that they should make a contribution. But the right hon. Gentleman is assuming the profits before they are made, deciding to impose the taxation before the profits are made. I share very much the doubts of the hon. Member for Hammersmith, North about whether these great profits in the export markets will in fact be made. If the hon. Member for Ebbw Vale (Mr. Michael Foot) is right, and the main beneficial effect of this change is import saving rather than increased exports, all the Chancellor will be doing is to pile excessive taxation on top of some of the most highly taxed industries in the world.
This is the Government's fundamental dilemma. They rely on private enterprise for exports almost overwhelmingly. The public sector makes a very small contribution. Yet they will not accept the need for proper incentives to those on whose successful efforts the economy depends, and the Government's action in


deliberately making exporting more unprofitable than it need be will merely negative much of what they are trying to do by this change.
The other point is the quite extraordinary one of referring certain local authority rents to the Prices and Incomes. Board. [HON. MEMBERS: "Why not?"] These will, of course, necessarily be rents imposed by Conservative councils for there are hardly any others. Hon. Members say, "Why not?" In most cases, perhaps they will realise that, if local authority rents are not moved, local authority rates will have to be increased to pay the deficit on the housing account. If the Government are to take the unprecedented step of interfering with local authorities in the management of their affairs—for the present Leader of the House when Minister of Housing excluded them from the fixing of fair rents—they ought to promise to refer the increased rates resulting from the withholding of those rent increases to the National Board for Prices and Incomes at the same time, so that there should be a fair consideration of where the burden shall fall.
The honest line for the House to take, and the one which perhaps characteristically the Prime Minister did not take, is the acknowledgement that, as a nation, we have suffered a defeat, we are in a position in which the standard of life of us all will inescapably be reduced, and we have suffered the failure of the efforts which the Government made to prevent it.
If this were such a wonderful triumph as some hon. Members suggest, why did the Government borrow all this money and spend all this money to try to prevent it over the last three years? They could not reasonably have spent the money unless they thought that it was necessary to prevent something which would be in some measure disastrous. They have now to face the fact that what they sought to prevent has actually happened and that everyone in the country will pay for it over the next few years.
The Government would get a far better reaction from the people if they told us this frankly, rather than indulging in gay and airy fancies that all this is a wonderful advantage. The way to get the best reaction from the people is to tell them that they are in a bad and dangerous way.

That has been the experience of all Governments who have faced difficulties. The Prime Minister's speech today is particularly regrettable because it ignores that fact and tries to dress up the situation in a fantasy that it is all for the best.
Leaving aside the 1931 crisis, we have established a very important precedent. It is that a Labour Government always devalue. They have moved a little quicker this time. The 1945 Government took four years. The present Government have only taken three. This is not coincidence. It is because a Labour Government do not understand and have no enthusiasm for the capitalist system which they are seeking to manage.
The people will have one lesson to learn from the events of last weekend. It is that, in any future Election, if they vote for a Government of the Labour Party, they are voting for a further devaluation and a hole in the £ in everyone's earnings and savings. Knowing that, if they vote again for a Labour Government, which I doubt, they will deserve the Prime Minister's straitjacket.

6.14 p.m.

Mr. Norman Atkinson: The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) ended on as high a note of drivel as he began and, in between those points of drivel, did not offer any constructive comment on the situation. The tragedy of this sort of thing is that it produces what might almost be called non-debate, because it is almost impossible to debate when one has these sorts of contributions, unless it is to debate the accuracy of the quotations used. The dates are about the only matters that we can discuss.
However, I agree with the right hon. Gentleman that one point is 24th July, but he can take comfort from the assurances given to the House that, whatever may have been said on 24th July, there will be no introduction of a wage freeze or wage restraint in this policy. That is of vital interest to hon. Members on this side of the House. On that issue in the policy, we are satisfied that there will be no reintroduction of wage restriction of that kind.
The first point which I want to make is that I now agree with the first part of The Guardian's editorial this morning. I do not want to comment on it, but the


accuracy of its wisdom is demonstrated by today's debate and the fact that the right hon. Gentleman the Leader of the Opposition could take up about 50 minutes and offer no constructive comment on the situation. It would be wrong to allow the occasion to pass without drawing attention to that. We have not heard any coherent Tory suggestion about alternative courses of action.
I shall support the Government tonight and I shall do it very willingly—

Sir Harmar Nicholls: A week is a long time in politics.

Mr. Atkinson: That may be so, but I shall support the Government because I reject the alternatives which are open to us. I shall support them not because I believe that devaluation is good in itself, but because it offers a possibility which does not exist in the alternatives. It is because of our absolute rejection of the alternatives that I support the Government's action 100 per cent.
I also support the declaration by the Government that a new strategy is about to be undertaken. That, again, gives us a great deal of heart, although we have reservations about the size of the defence cuts and we want some more assurances that this is not a repeat of the token £100 million which comes up from time to time. We shall seek more assurances about that, and try to influence the Government to improve upon the £100 million of which they have spoken.
The reference to a new strategy indicates to us that we are about to see the development of new ideas and perhaps a new approach to our whole economic dilemma. We welcome the Government's action and give them full support. We also welcome the statements made about a return to full employment. We hope that that takes place within the shortest possible time. In trying to pursue policies bringing about full employment, again we shall be behind the Government 100 per cent.
However, we need a little more clarity about the regions and the way that the policy will operate. Comments have been made about it which have given us cause for concern. The Leader of the Opposition said that there is a need for an analysis of unit costs in the regions, so

that we can understand the policy that we are pursuing and come to grips with the problem of trying to mobilise our productive resources and create a flexible economy which, in the end, will result in the achievement of our objectives. There is a need for an understanding of unit costs in various parts of the country, and I hope that the Government will take note of what has been said about it. I have been trying for three years to get some sort of analysis and investigation of industrial costs. I hope that it will be looked upon as a worthwhile job which is particularly necessary at the present time.
There was a curious twist in the speech of my right hon. Friend the Secretary of State for Economic Affairs last night. He was talking about our trying to maintain the same overall global consumption in the country and, within that framework, to develop a policy which will allow us to increase enormously the size of our exports, at the same time balancing it with a decrease in home consumption. This is a dangerous policy which could involve many dangerous aspects. I hope that a great deal more thought will be put into some of the problems that are likely to arise.
My right hon. Friend went on to develop this theme last night. One assumption was that so that the unemployed at present should be able to eat more, those who are working should eat less. When one develops a theme of that sort serious complications can arise. Therefore, I hope that we will not be too rigid about the sort of idea that there is this fine balance to be achieved within the economy which means that those in work accept that they are to suffer from some degree of deflation or reduction in living standards but can take satisfaction that by so doing they are helping others to become employed.
I want to deal with two of the issues as trade unionists see them. The first is prices. I do not mean prices on the Stock Exchange. The pictures yesterday illustrated again the opportunities that were taken by our financiers and such other representatives of the City—

Mr. John Smith: The hon. Member does not understand.

Mr. Atkinson: —patriotically to take advantage of the situation.
The hon. Member for the Cities of London and Westminster (Mr. John Smith) says that I do not understand. I think that there is a great deal of understanding about the antics in Throgmorton Street. One of the creditable things that the Government did was to anticipate the performance and behaviour of the hon. Gentleman's friends, so they closed down operations for one day. The only tragedy is that they did not multiply that operation by 365.

Mr. John Horner: I wonder whether my hon. Friend noted the City column of yesterday's Evening Standard, dealing with the Bank of England's intervention by preventing speculators getting their reward. It said that, nevertheless, speculators had not burned their fingers; they had gold fingers.

Mr. Atkinson: I do not need to comment on that intervention, except to say that I go along with it entirely. Without saying a great deal about money, that is the situation.

Mr. John Smith: Does the hon. Gentleman think that these speculators were British or foreign? Which does he think they were? I work in this market and if I happen to catch Mr. Speaker's eye I will be able to tell him. But which does the hon. Gentleman think they were: British or foreign?

Mr. Atkinson: Going by accent, they would seem to come from the Southern part of the country. I thought that I could identify them with that broad area known as the gin-belt of Britain. The costume that they wear in Throgmorton Street is so identical that it is difficult to identify which country, let alone Britain.
I want to talk briefly about the bonanza in prices that manufacturers and traders have obtained from Government legislation of the past. I refer to the period following S.E.T. In that period, retail traders, manufacturers and distributors exploited the people mercilessly and tried to condone their behaviour by saying that this was a result of the Government's action. Their crime was serious and cawed serious damage to the whole of our price mechanism. There was no justification for what they did. Very

shortly, we shall be seeing a recurrence of this kind of bonanza arising from the action taken by the Government, because, again, retail traders, manufacturers and distributors will exploit the situation by claiming that their increased costs are the result of increased import charges.
I therefore appeal to the Government to do something to prevent this sort of thing happening. It is no use when it is too late complaining that trade unionists are starting to apply pressure to make amends for the damage which has been done by these people. If we are serious and responsible about a prices policy, there is no reason why the Government cannot say that anybody wanting to increase prices must ask permission to do so. There is no reason why that cannot be a policy of this Government. It does not involve a great horde of inspectors or a massive Government structure to implement such a policy. We could by law compel those who sell or manufacture things to make application when they want to increase the price of their goods or the services that they sell. If, as the Government said some time ago, there were comparatively few price increases over the past 12 months, it should not be such a mammoth task to compel people to apply for a price increase rather than the other way about. In this situation it is for these people to justify the increases which they may demand. With a policy of that sort we would get a very different atmosphere relating to wages.
Finally, I want to comment on the obsession that we have about wages and their effect not only upon our productivity, but our national economy. I would remind the Government of something which has happened in the last two years. The Chancellor of the Exchequer, the Prime Minister, and other members of the Government have consistently said to the nation that they are afraid to create a situation where there are too many jobs chasing too few men. They have claimed that as a result of that policy over the last two years disequalibrium is established in our economy. They point their finger at workers as being responsible for this. Over the two years, 1965–66 and July, 1966, to July, 1967, the people to whom the Government have often referred—the skilled workers on payment by result methods—have had exactly 2d. an hour increase.
It is not true that a situation of jobs chasing men produces inflated wages, because our experience over those two years shows that that is not the case. Again talking about the most vulnerable section of our economy, according to the Government—the skilled workers earning a living by results or being paid by results —the average wage at the moment is 9s. 7d. an hour.
It is true that in London and Coventry average earnings are about 2s. an hour above that figure. However, the curious thing, which does not seem to be noted by the Government in their argument, is that it is in those areas where the earnings are far higher than the average that the greatest productivity occurs and our unit costs are lowest. [An HON. MEMBER: "The same as the United States."] This is an economic fact. It is the same as the United States, as my hon. Friend says. Unit costs are lower in these areas and, therefore, the Government should not be directing attention to Birmingham, Coventry, London and other places where earnings are above the average, but should be concentrating on employers who insist on offering wages much lower than the average, where their unit costs are higher, and suffer greatly in competing not only in the home market but in markets abroad.
There is ample evidence that this is the pattern of the wage struggle and we ought to recognise it. Those with experience of industry know that when wages have risen employers have been compelled to modernise their equipment and to invest more in their plant, with the result that productivity bargains have been made and unit costs have come down in the end.
London and Birmingham are not the problem areas. This is not a question of trying to maintain a balance between the so-called over-heated areas and the less fortunate ones. By way of contributing towards our economic good health, the Government should force employers in Wales, in the North of England, in Scotland, and in similar areas to use modern methods, to modernise their equipment, and to pay double the wages that they are paying at the moment. I say "double" because only by this means will they come into line with some

of the wages paid in the South of England.
Those are some of the lessons which we must learn from the present situation. We must not close our eyes to what has happened during the last two years. We must learn from that experience, and apply our knowledge to the situation which faces us at the moment. If that is done, the policy which we are supporting on this occasion, a policy which has been outlined by both the Prime Minister and the Chancellor, will give us an opportunity to create a new flexible economy and to develop the dynamism and drive which is so necessary at this stage.

6.31 p.m.

Mr. John Smith: Like so many of our discussions, this debate is largely a postmortem; and as we do not mean to devalue again, having a post-mortem is not very valuable. Moreover, whatever the Prime Minister says, devaluation is not something that one does; it is something that catches up with one.
There is, however, one aspect of the devaluation which I must mention, particularly because it was referred to by the hon. Member for Tottenham (Mr. Atkinson). It appears that when the Chancellor spoke last Thursday, in answer to a Private Notice Question from the hon. Member for Ashton-under-Lyne (Mr. Sheldon), the Government had decided on devaluation. As soon as the Chancellor finished speaking, it was obvious to all what was afoot, and an extremely costly run on sterling developed.
I felt that that Question was about as helpful as inquiring, in the middle of a battle, what the terms of surrender are. In consequence, the Government should have devalued immediately, but they did not. Various estimates have been made of the cost to this country as a result, and there was a passage of arms between the Chancellor and my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) about this yesterday. Estimates were made and names were called for.
My work is partly concerned with this market, and there is no need to make estimates. There are four ways in which the sum involved can be arrived at with almost certain accuracy. If I may, I will


explain that one to the House which it is easiest for people to pursue for themselves.
Foreign exchange is normally dealt in at two days' settlement. One has to pay for it two days' later. Everything was shut on Monday, and, therefore, sterling sold to the Bank of England on Thursday and Friday was settled for yesterday. Yesterday the Bank of England will have drawn off the money market via the clearing banks—because that is the only way in which settlement can be effected—the amount of sterling it bought on Thursday and Friday. The money market has to balance its books every night. Therefore, during the course of the day, the Bank of England will, by one means or another, have replaced this sterling in the money market. The extra turnover of the money market yesterday will, therefore, represent accurately the outflow from our reserves on Thursday and Friday.
There are 12 firms in the money market. Their relative size is known. Therefore, the turnover figures of any one of them for yesterday will show the amount spent in support of sterling as a result of not devaluing at the time of the Private Notice Question last Thursday. All four methods give the same answer, and it is correct. I shall not give it, because I do not think that it would be helpful to do so, but I will give it if the Government spokesman tries to conceal the gravity of the figure. I will, however, say that it is in excess of the figure suggested by my right hon. Friend the Member for Enfield, West yesterday, at col. 1155 of HANSARD.
Naturally, foreign institutions congratulated the Government. The Government gave them time to protect themselves—in some cases justifiably. As my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) said, there is a good deal to be said for paying one's creditors in full. He did not give an additional reason, which is that one day one might need those creditors again. One may want them to lend one money again. However, a very large sum of money has been irretrievably lost to this country by the Government's delay.

Mr. Ted Fletcher: The hon. Gentleman said that this country

had lost in excess of £400 million, which was the figure mentioned by his right hon. Friend—[HON. MEMBERS: "No."] The right hon. Gentleman mentioned three figures. He talked about £1,000 million for a fortnight, and I thought that he said £400 million. It may be £300 million, but the net loss is £150 million. If the country has lost this amount, who has it? In whose bank account is it at the moment? How many British people have speculated and taken this money from the country?

Mr. Smith: I was, and am, coming to that. It is virtually impossible for a British resident to speculate in currency, and the hon. Member for Tottenham should have known that before he made his speech.
The money market firm with which I am concerned deals with practically every bank in London, and, therefore, with practically every bank in the world. Yesterday, not one of the foreign banks with which my firm deals had one penny of sterling with us. Owing to the amount of warning which had been given, every foreign bank had converted not part of, but all, their balances. An enormous present has been made to the speculators of the world, and some of these speculators are the last people whom any of us would wish to enrich. Well, we do not mean to devalue again, and as Chairman Mao has observed, "experience is a comb which nature gives us when we are bald"; but there is heavy blame here, and I hope that it comes home to roost.
I would like, briefly, to make three constructive points for the future. We are in for a difficult time, and my first point relates to overseas investments. These have been discouraged, or in some cases forbidden, by the Government. Without mentioning the other merits of overseas investment, I think it is worth noting that of the improvement which we expect to get in our balance of payments because of this devaluation, between £100 million and £150 million will come from the increased value in terms of sterling of the earnings on those overseas investments. This sum is certain. It is fixed, and nothing can alter it. It is in the bag, which is more than one can say for the other figures, which are largely an expression of hope.
Now, our reserves will undoubtedly increase over the coming months as a result of this devaluation, but reserves can be kept in many forms—in gold, in foreign currencies, in Government obligations of foreign countries—or they can be kept in the form of overseas investments held by nationals of this country. I hope that, as our reserves go up, the Government will allow overseas investment again, because this is just as much a part of our ultimate reserves as if the money were in the Bank of England.
Secondly, I hope that the Chancellor will reduce the Bank Rate very soon. The present rate is a signal of extreme crisis which is not a signal which we wish to fly, for the world to see, for a moment longer than we can avoid. It greatly increases costs, particularly the cost to the taxpayer, of Government borrowing, and also the cost of housing. The Prime Minister said that the housing programme would not be cut. I wonder whether he meant in total amount of money or in numbers of houses, because with Bank Rate at this level these are not the same thing.
Bank Rate at this level also attracts so-called "hot" money. Hon. Members have spoken against "hot" money. Personally, I have no objection to it. "Hot" money, properly used, is a great deal better than no money, and exactly the same arguments apply to sterling as a reserve currency, which some people also dislike. But if one does not like "hot" money, then that is yet another reason for the earliest possible reduction in Bank Rate.
Finally, however devaluation is presented, we are the poorer. There cannot be any argument about that. This is a defeat. There has been talk of the Dunkirk spirit, but this is not a bit like Dunkirk, from which we escaped, I remember, with the help of the French —the XVIth Corps. The situation has, in my view, more in common with Munich, particularly in view of the rash enthusiasm with which it has been in some quarters greeted.

Mr. Stan Newnes: Will the hon. Gentleman say what his alternative would be to devaluation? I respect his honesty and what he is saying, but what

would he have done if he would not have devalued?

Mr. Smith: That question falls into the narrow category of questions like, "Have you stopped beating your wife yet?" Of course, one cannot blame a spendthrift for going bankrupt, but had one been in his situation one would have been less of a spendthrift.
If we are the poorer, we must give up something, if only temporarily.

Mr. Newnes: What?

Mr. Smith: I suggest that we give up two things. First, we should give up, temporarily at least, what the party opposite would call the pursuit of perfection and what some of us might call an overlarge public expenditure, or even luxury. It would be admirable, for instance—and I take random examples, neither of them particularly good—if employment agencies, which were the subject of a Bill last Session, were always beyond reproach; or if no single factory were ever built in the wrong place. But regulating these matters minutely involves complication, delay, registration, licensing and inspection, and all of this increases costs; and the costs, no matter where they are borne, affect our ability to earn foreign exchange; and at this moment we cannot afford that.
I can give a particular example. I have to do with an American firm which manufactures equipment for the motor car industry in the South-East. The whole of its materials and its labour come from this country and, therefore, it is of 100 per cent. advantage to this country. It wishes to expand. The land next to its factory is covered with nettles and available. However, the firm is told that, instead, it must go to a region in the North. The American manager gets out his atlas and finds that several European countries are a great deal closer, and he wishes to transfer his factory there.
The other thing I suggest that we should give up temporarily is the luxury of envy. To make sure that nobody makes what is described as too much money, we are trammelled up with legislation and with distortions of the economy. For example, the increase in Corporation Tax, now announced, will directly reduce the amount of money available to industry for investment and


growth. There can be no possible argument about that; and investment and growth is exactly what the Government have said again in the last few days they wish to encourage.
We cannot both redistribute our cake and eat it, which is what the Government have been trying to do. Could we not have a breathing space from complex and doctrinaire measures? We shall all have to do a great deal of work in the time ahead, but there is no reason why we should be made to work in a thicket of briars. Could we not concentrate for a year or two not so much on putting human nature to rights as on putting Britain to rights first?

6.46 p m.

Mr. Richard Crawshaw: This must be one of the most critical debates we have had during the lifetime of the present Government. Whereas, in other circumstances, aspects of the economy have been debated, on this issue we go to the roots of the problem and I say at once that I for one will not be able to support the Government this evening. For that reason, I have resigned my party Whip.
Devaluation may have been the only course left open to us, but I think that we are begging the question. What we ought to be asking ourselves is why we are in this position. I do not believe that we have necessarily adopted the wrong policies. I believe that, right throughout, we have failed to carry out policies to a logical conclusion.
We can talk until we are blue in the face about who is responsible for the crisis which existed when the Government took office, but there is no doubt that public apathy is an indictment of both parties. The public are sick and tired of politicians of all kinds, of people saying one thing, meaning another and attempting a third. The gulf which begins to exist between politicians and people is a bad thing for parliamentary democracy.
We did inherit a crisis, whatever right hon. and hon. Members opposite say. It was there. I for one do not believe that that crisis would have been as severe if the party opposite had been returned. I say this because on two occasions in the past a Labour Government have devalued the £ and I think that the

present Government ought to be particularly careful when they are weighing up what might be the implications of that in another 15 or 20 years' time. If the seesaw in the ordinary course of events means that another party takes over the government of the country from this one, what happens if another Labour Government is returned later? Immediately, we are branded as the party of devaluation. Another crisis will be upon us. It is because of that and because I believe that we could have taken measures which would have warded this off that I find myself unable to support my party tonight.
One may ask: do I oppose devaluation in itself? I criticise the fact that we have been driven into a position in which it is put to my hon. Friends, "You either accept this or accept that." I do not believe that we should ever have been put in that position. From some statements, it appears that devaluation is a newly-found panacea for all our ills. I ask my hon. Friends, if it is the remedy now and has such great possibilities, why has it not been adopted before and in more favourable circumstances? The time to devalue is when one is at liberty to devalue, in one's own time, and not when one is forced by circumstances to do so.
Devaluation, if not accompanied by other measures, will not be a lifeline but a leaden weight which will sink us completely. Those measures must, of necessity, be bitter pills for everyone in the House and the country to swallow.
I will now try to say why I believe that the Government have failed. We were told that No. 10 Downing Street would be a powerhouse. In opposition, everyone attacks the dead hand of Whitehall, but as soon as he takes office it is accepted and the dead hand continues. Where are the great reforms which were to happen? Why do we still have Labour policies thwarted by reactionary civil servants? This is happening. Where are the heads which should have rolled, not only on the Front Bench but in the Civil Service itself, for the failures of our policy? 
We rightly encourage private industry to modernise, yet not a single Government Department has been modernised. We are still being fed incorrect and out-of-date information. Is this modernisation? An increase of over 40,000 has taken place


in the Civil Service. We rightly ask industry to live off its fat and cut down on the number of workers; should not that equally apply to the Government? I will remind the House of an expression used by Winston Churchill when he went to Cairo at the time of the crisis in the Middle East. He said that we would overwhelm Rommel by the sheer weight of G.H.Q. alone. We are getting near that stage in the Civil Service.
We are supposed to be a party of planners, but there is obviously little coordination between Departments. I am not criticising individual Ministers—a Minister has a full-time job and has not time to look outside his own Department —but where is this co-ordination? When we were talking the other day about the vital question of pit closures and about other industries being put into those areas, why should a Minister have said, "That is not my Department, but someone else's"? This is what I call planning. It is not planning to throw miners on to a scrap heap without alternative employment being found for them, however uneconomic those pits might be. It is more economic to pay them to work an uneconomic pit than to pay them unemployment money when there is no work for them to do.
On defence, I pay tribute to the Secretary of State. I have had many contacts with the Army over the last few years and I know that it feels that the fighting machine is the best that it has ever been, despite the rundown in manpower, but I am very sceptical about this suddenly produced £100 million cut. I and my hon. Friends have been constantly asking for cuts in military expenditure. How is it that we can suddenly find £100 million overnight which can be cut, but which we could not cut before? One cannot accept these things. In Egypt, Cyprus and Aden we built up expensive equipment and establishments. We are doing the same in Bahrain. Why? To hand it over again in another two or
three years? This is not common sense to me.
I would now turn to foreign affairs. Rhodesia and the amount of money which that
is costing has been mentioned. Whatever view one forms on the rights and wrongs in Rhodesia, there is no doubt that we have had the worst of both worlds, because there has, right from the

start, been a lack of determination to solve the issue. I do not believe that we should go running around the world trying to put that situation right. Our resources and our military manpower are limited.
However, I think that when one has a moral responsibility one should at least put that into action. We were told that we would never use force in Rhodesia, and I know the circumstances in which that was said—

Mr. Speaker: Order. The hon. Gentleman may discuss the financial implications of Government policy on Rhodesia, but may not debate foreign policy in this debate.

Mr. Crawshaw: It has been said that one of the reasons for the deficiencies is what we have had to pay for sanctions against Rhodesia. I am convinced that, if we had adopted a strong policy against Rhodesia, the problem could have been solved.
Then there is the recent situation in the Middle East. This country has had a great record not only for good causes and for justice, but also for trying to help people in other parts of the world. What I cannot understand about the present situation is why one week it is Nasser who is the aggressor and the next it is Israel. This is what happened in this aspect of our foreign policy. When it was against us—

Mr. Speaker: Order. The hon. Member must link his remarks to the economic situation.

Mr. Crawshaw: I will try, Mr. Speaker. I will be touching in on that in a moment.
Is it true that we have not any military forces capable of dealing with the Rhodesian situation? What is the purpose of our military forces if they cannot deal with a situation like that? 
My main criticism is that the Government have never put the issues fairly and squarely before the public. The July measures were brought forward in a moment of crisis. We were told that the prices and incomes policy would be voluntary, but did anyone in his right senses really believe that it would be? We were told today that it would be voluntary, but do we really believe that, in the ultimate, it will be voluntary? 
Concessions were made in the April Budget and, at a private party meeting—which is normally reported in the Press, of course—I was the only Labour Member who criticised the Chancellor for not being tough enough. Hon. Members can imagine the response to that in my constituency, but I wonder whether I was very far from the truth when I said that in April.
I would like to pay a tribute to the Chancellor of the Exchequer. I believe that he is a completely honest man. I do not believe that he could stand at that Box and tell anything other than the truth. It must be a very great disappointment to him that he has been unable to maintain sterling, as was his intention.
What of the future? I know that many of my hon. Friends—I mean friends in every sense—welcome devaluation, particularly my friends on the Left, but I wonder whether they have thought out its implications. We have been told that it is a better alternative than accepting a loan with conditions which we do not want. I think that it might be better if they ask why we are in this position of having either to devalue or to accept a loan which we do not want. It is not much satisfaction to a man to be told, "You can be either poisoned or hanged". He might ask himself, "How the hell did I get here?"
I listened to the Prime Minister's broadcast. I was hoping that there would be a call to the country to buckle to, that the issues would be firmly placed before the people. I have the full broadcast here. Probably the most serious thing said in that affecting the public was the passage about
… higher prices over a period for some of our imports, including some of our basic foods …
To the ordinary member of the public listening to that broadcast that is as far as they think this issue affects them. Hon. Members know that the issue does not even start then; it is much deeper than that. We are told that this devaluation is a lifeboat that will save us. As I look round I feel that we had a motley crew for the lifeboat.
I tell my hon. Friends here that it is no good being in the lifeboat and just coming up for rations—one is expected to row this boat. [An HON. MEMBER:

"We have done it all our lives."] That may be so, but you will be asked to carry out policies which many of you last year abstained from supporting and remained seated on these benches. Whether you like it or not, that is the situation.

Mr. Speaker: Order. The hon. Gentleman must address his remarks to his hon. Friends through the Chair.

Mr. Crawshaw: What I would like to know from my hon. Friends is, when they support this policy tonight will they carry it to its logical conclusion and support the necessary ancillary programme which will make devaluation the only possible working answer? I have my doubts. We have been told that we have been blown off course. There are many reasons for being blown off course. It could be that the helm was not held, and this is the criticism that I am making. Will my hon. Friends support cuts in capital expenditure? It is all right when one is talking of a global figure, but when one gets down to a particular figure and is told that this will be cut, then will they support the Government? 
Will they support a real prices and incomes policy, because if we allow prices to increase, if we allow wages to run away, our present difficulties will be small in comparison with those in which we shall find ourselves. It is all right my hon. Friend the Member for Tottenham (Mr. Atkinson) saying that one just needs a few people going around telling others that if they want to put prices up they have to ask permission. [An HON. MEMBER: "Who said that?"] Perhaps I misunderstood what he said. I thought that he said that it would not take many people to form a Department to which others would make applications to put up prices. We are dealing with hundreds of millions of individual articles.

Mr. Atkinson: This is an important point. I must correct my hon. Friend. What I said was that we should shift the whole emphasis and should put the responsibility on to traders, make them apply for permission to increase prices. There is no need to have hordes of people.

Mr. Crawshaw: It would be very interesting to know how the hundreds of millions of individual articles which would


be affected could be supervised in this way. Last year, when we had a prices and incomes freeze, the two main reasons why prices could go up in the shops was an increase in the import charges or an increase in wages—two things which could be verified. How can one possibly verify whether an increase is justified now, when every manufacturer has the excuse of devaluation and the fact that he had to pay over and above the odds for what he is importing?

Mr. Sydney Silverman: Does my hon. Friend—

An Hon. Member: Address the Chair.

Sir E. Boyle: On a point of order. With respect, it is surely very unusual, in this House, for an hon. Member to make an intervention, turning round to another hon. Member, and making no effort to address the Chair.

Mr. Speaker: Order. This is purely physical. The hon. Gentleman had given way to the hon. Member for Nelson and Colne (Mr. Sydney Silverman). It will help if he speaks towards the Chair.

Mr. Sydney Silverman: I am sorry if I turned my back upon you, Mr. Speaker. There was no intention of disrespect. All I was asking my hon. Friend, who was good enough to give way to me, was whether it would not be competent for the Board of Trade to make a sufficient assessment of the increased costs of imports so as to be able to determine whether an increase before it was justifiable?

Mr. Crawshaw: I would be very surprised if this was so when one is dealing with hundreds of millions of individual articles.
I was hoping today that the Prime Minister would have made me change my mind. I was hoping that he would put the facts quite bluntly before the country. We did not hear them today. On the one hand, things are difficult, and then he turns round and says that, of course, we will not cut this or that, and everything will go on the same. I do not believe that this will be so. I believe that there will be cuts and that people are entitled to know what will happen. We are told about protection of the least fortunate of our citizens. It has been suggested that

there is something wrong with selective benefits.
I did not join the Labour Party to give family allowances to people on £2,000 and £3,000 a year. The very mention of the words "means test" makes everyone hold up their hands in horror. We are talking about a means test of the 'twenties—let us get on to the P.A.Y.E. and have these things done in the same way as Income Tax. So many of my hon. Friends have maintained this bitterness towards any selection that they are now seeing a large percentage of the children of the country living below National Asssistance level rather than accept a realistic policy in which the jam could be spread thickest in those parts where the need is greatest.
We talk about nationalised industries. If we made them so that the workers felt that they were working for something other than an obscure person, they might be interested in their employment. But we have built up these monoliths which are now more impersonal than most of the other industries.

Mr. Thomas Swain: Mr. Thomas Swain (Derbyshire, North-East) rose—

Mr. Speaker: Order. I cannot stop interventions, but many hon. Members wish to speak.

Mr. Swain: With due respect, Mr. Speaker, I want to ask my hon. Friend whether he has forgotten that the nationalised industries which he is criticising have a higher rate of productivity increases over the past 10 years than any other industry in the country?

Mr. Crawshaw: I am not talking about productivity, I am talking about the workers in those industries, and whether they feel that they have any participation in them, whether they get any of the benefits which they have put into them. I believe that if we really nationalised them so that the people felt that they were part and parcel of them we would not have to sell nationalisation—it would sell itself.
Now I come to the trade unions. [HON. MEMBERS: "Too long."] I am sorry if I am taking an undue amount of time, but this is important because I do not believe that we will hear these points from this side of the House. We are told


that it is necessary to reform the trade unions. I believe so, too. We need strong trade unions which can assert their authority. At the moment, they do not seem to be able to do this. Let us face the fact that people do not go on unofficial strike unless there is discontent in that industry. It is lack of public relations which causes this.
My reason for not supporting the Government tonight is that with so many problems that have confronted them they have shown a lack of determination: at the first opposition, wherever it has come from, the barricades have been lifted, the city has been given over. By this devaluation that has been forced upon us in these circumstances, the sacrifices that the workers have made for three years have to a great extent been wiped out, and we are now starting from scratch again
If I could really believe that the Government would carry out a policy ancillary to this devaluation which was necessary to get the country on its feet I would support them, but on so many economic issues they have given way—right, left and centre They have failed to carry out either the policies on which they were elected or those that they have advocated from the Dispatch Box I only wish that in Sunday's broadcast the people had been told what was expected of them, what they would be required to do, what hardships they might have to suffer Today, again, I was hoping that we would hear it from the Dispatch Box. We did not hear it. To that extent I regret it.
I think that the Prime Minister became Prime Minister with the greatest fund of good will in this country. I believe that he could have carried forward any policy he wished—he was strong enough to do that. But I indict the Government for a lack of guts, for a lack of determination, and for a lack of honesty in telling the people what is required of them.

7.13 p.m.

Mr. Charles Fletcher-Cooke: The House has listened with deep appreciation to the impressive speech of the hon. Member for Liverpool, Toxteth (Mr. Crawshaw). The reason is that, as we all know, every year party discipline on both sides of the House gets stronger and

stronger, and when an hon. Member nevertheless feels obliged for reasons of honour to defy his Whip it is something that all back benchers must rejoice in. The hon. Gentleman has obviously been brooding on these questions for a long time—from the list of indictments he has brought against the Government his is obviously no sudden decision—and I hope very soon that, with his sincerity and eloquence, we may see him on these benches for ever.
The hon. Gentleman was so right to say that the Government have not explained to the people that this is not a "break-loose," as they pretend, from the old position. It is the same position at a slightly lower level. It is not as though the rates of exchange have been left to float, or have broken free—that would, indeed, be a change, perhaps for the better —in our economic situation. Nothing like that has happened at all. All that happens is that the stage has been lowered by fourteen-point-something per cent., but all the characters on the stage are still trussed up and bound; all the imprisonment of our history, geography and circumstances is still upon us, but just that degree lower. There is therefore no possibility of describing the situation as a great breaking loose from the fetters of the past. The fetters are still there. The only question is whether the ancillary measures will enable us to make the best of our situation which, for reasons that have been given, is now much worse than it was before this devaluation.
I believe the best and most successful devaluation operation we know of in a modern industrial society was that of France in 1957, but if one reads the history of that devaluation it is quite clear that it was accomplished by means of very savage and disagreeable methods, including rule by decree. It is no surprise that we are being lectured by M. Jacques Rueff to do the same. I do not suppose that anybody will accept that but, as the hon. Member for Toxteth said, if the population gets more and more fed up with the double talk of the Government, if they get more and more disillusioned by politicians as a race, who knows but that that may not be their answer, even though it is not the answer of any of us? 
The Government say that they will not take savage measures—to such an extent


that the hon. Member for Ebbw Vale (Mr. Michael Foot) said, and very rightly:
But do not let anybody mistake it: the Government are committed to bringing in major proposals for increased expenditure on the social services …."—[OFFICIAL REPORT, 21st November, 1967; Vol. 754, c. 1170.]
I invite the House to take note of those last words:
… committed to … major proposals for increased expenditure on the social services.
It may be very desirable to do that, but no devaluation has ever succeeded with such an accompaniment. For the Government to pretend that it can be done, to give the impression to the hon. Member for Ebbw Vale, to other hon. Members and to the country that, somehow, things will be much better for the ordinary people instead of much worse, is, to me, misleading them to a disgraceful extent. Obviously things must get worse, and certainly for a period.
But the President of the Board of Trade says, "No, not so." This is not deflation. He went out of his way yesterday to say that it was a mere rearrangement of our resources. He stated
… we shall have, as I have said, a rapid growth of output over the next 12 months. That is the answer to the question about deflation. The difference is that expansion will now be export-led and its speed will be governed largely by our success in export markets."—[OFFICIAL REPORT, 21st November, 1967; Vol. 754, c. 1149.]
He was evidently denying the existence of any deflation or deflationary intention although, at the same time, the increase in taxes—and particularly in Corporation Tax—and the higher Bank Rate are to an extent deflationary. 
Mr. Speaker, you have asked us to be brief and I promise to be so. We want much more detail about this cutting of Government expenditure. It is still not clear from what the Prime Minister said —indeed, he evaded the question—whether the £100 million cut on overseas expenditure, particularly on military expenditure, is net or gross; that is to say, whether it comes off the £400 million increase which devaluation itself carries with it in this field, making a net increase in expenditure of £300 million, or whether it is additional in the sense that there must be a gross cut of £500 million. If devaluation immediately costs another £400 million then, if this pledge of £100

million from overseas expenditure means anything, it must mean that, in practice, £500 million is cut. Is that what the Government mean? Nobody has answered that question, although I should have thought it very elementary.
We have had no indication whatever about the effect on home expenditure. I suggest very seriously to the Government, and I follow the remarks made by the hon. Member for Toxteth about the growth of the bureaucracy, that they seriously consider the Geddes Axe—[HON. MEMBERS: "Oh."]—that well-known instrument which successive Governments have failed to grasp but without which this business of devaluation will be of no advantage to us at all.
We were told by the Chief Secretary to the Treasury yesterday, in answer to a Question, that since 1st October, 1964, there has been an increase in the number of non-industrial civil servants to the extent of about 50,000. That means the Civil Service has gone up to something approaching half a million. Not only the Civil Service, but all industry and everyone knows that if they got down to it they could whittle away the numbers they are employing at the moment and still do the same amount of work. This is a difficult thing to do. Industry is being squeezed to do it in various ways, and quite right too, but no such pressure is brought on these bureaucrats.
The additional money for the extra 50,000 in wages alone I reckon to be something like £60 million per annum. We know from a previous Answer to a Question that the mere rents of the additional offices amount to about £10 million per annum. We are spending something like £70 million or £80 million on additional non-industrial civil servants recruited in the last three years. Not only they, but the 400,000 who were there before should have a commission to examine and to see whether in certain cases—not necessarily the new ones—two men cannot do the work which three are now doing. I believe very strongly that they could.
This is difficult, of course, because all these additional civil servants have been established and promised pension rights. No Government, neither this one nor its successor, will find it very easy to get out of those obligations. That, however, is


one way in which Government expenditure could be cut without alterations to the policies which hon. Members opposite would fight for so bitterly. Whatever we think of their policies, it is not possible to reverse them quickly. That I concede. Therefore we have to put through a fine tooth comb the instruments by which these policies are carried out and that could be done immediately.
We are told that there will be a 3 per cent. increase in the cost of living almost immediately. That figure, which I think a conservative one, is, I believe, a Government one. We are also told that there is to be no increase in wages to account for that. That was the statement made by one of the speakers from the Treasury Bench yesterday. What do the Government propose to do if the unions insist on having an increase to compensate for this? Of course if that happens the whole purpose of devaluation will have gone. Of course, if it does not happen, again maybe the whole purpose of devaluation will have gone, because with our union structure in its present form they are in a position to insist and if they do not get it our export effort will be seriously decreased.
We were challenged by the Prime Minister to say whether we were in favour of devaluation or not. So far all hon. Members who have spoken in the debate have said, rather as a noble Lord said in another place yesterday, "it need never have come to that; it need never have happened." Even so I think the Prime Minister is entitled to know where people stand in the short term. I say quite frankly and speaking only for myself, I would not have devalued. I would rather have accepted a loan because I think the conditions which would have been
imposed would have been things which we have got to do anyhow. We have to do those things in any event, so we might have saved ourselves loss of faith, breach of trust and loss of money caused by this devaluation.

7.25 p.m.

Mr. John P. Mackintosh: I am glad that the hon. Member for Cambridge (Mr. Lane) is in the House so that I can congratulate him on his maiden speech and the way in which he spoke about his predecessor, which I think pleased everyone on both sides of the House.
I am also glad to take part in this debate, because we have heard a very good debating speech from the opposite benches by the right hon. Member for Kingston-upon-Thames (Mr. Boyd Carpenter) which I felt called for an answer because he put in the most succinct manner possible the moral case for devaluation as a defeat and a let-down for this country. This is the kind of case I expect to be deployed from the opposite benches and one which ought, in fairness, to be met and answered.
I accept that in a sense this is a defeat for a specific policy, but in the long term I should have thought that hon. Members on both sides of the House would have recognised that we have been making an historical adjustment in this country to our changed international position, an adjustment which has been going on for 30 years. It occurred for the first time when this country went into deficit in the 1930s, a situation which was concealed then by mass unemployment. It is a situation which has recurred ever since 1945 and the number of expedients open to this country to meet the problem are strictly limited.
During the last years of Conservative government two different strategies were employed to meet this problem of the lack of Britain's ability to pay her way with her declining industries and with a changed trading position. One was the
strategy which was associated with the name of the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) and the other was associated with the name of his successor as Chancellor of the Exchequer, the right hon. Member for Barnet (Mr. Maudling). Of those two strategies, one of deflation and the other of maximum growth, maximum investment with balance of payments deficit covered by borrowing, I preferred that followed by the right hon. Member for Barnet.
I wish quite sincerely that it had succeeded, in the interests of this country, because it was a determined effort to break out of stop-go. It was an attempt to expand in the hope that investment in our industry would break through the competitive barrier and that our exports would then rise sufficiently rapidly to keep pace with our import bill. Unfortunately, that attempt failed. It failed


after this Government took office. I accept that.
What is interesting is whether, irrespective of which Government was in power, this policy could have succeeded. I think that most would now agree that it might just have got past. It might have got past but for the extreme strain which it imposed on balance of payments and the extreme burden of such a heavy borrowing programme, especially when we consider our vulnerability to things such as changes in the terms of trade, alterations in the international situation, domestic events such as the seamen's strike, none of which could be attributed to or blamed on one particular Government or another.
I am sorry that that strategy did not succeed, but when it failed I think that hon. Members should recognise that to pursue it a second time was inevitably harder because then we had a tremendous weight of debt which prevented us from retrying that policy. Once that policy was put aside as a possibility, it left us with a very narrow set of choices. We had either to accept moderate growth of 4 per cent., which we tried for a time, or the later Treasury orthodoxy of a 3 per cent. rate of growth plus structural improvements in British industry which, it was hoped, would raise exports to the same level as imports. The other or third alternative was extreme deflation. Then there was the one which until Saturday was called "the unmentionable"—devaluation.
It was unmentionable, not because it was morally degrading or wrong. There is a special case that small countries, particularly developing countries with sterling balances, may have been let down, but it would be far worse for them if the British economy totally collapsed.
As to the question of the past speeches of the Chancellor of the Exchequer, he has to keep saying that he would never devalue, especially when the £ is under pressure. This is why it is possible to quote Ministers denying any such intention until the day before it has to be done. Hon. Members know this as well as I do. Hon. Members opposite have lied for their country often enough in similar circumstances of danger to the £.
Given these choices, given the situation as it stood, I, for one, thought that we should have devalued last April. A number of hon. Members on this side of the House said this on the debate on the Budget. The time at which it should be done is largely a matter of judgment. Given that we could not grow as fast as the right hon. Member for Barnet wanted, we then had a choice between slow growth, serious deflation, or devaluation. To represent this as a choice between a wild
or bad Government and a good Government is entire hyperbole and quite beside the point. It was a choice of what was practicable and sensible and likely to produce a return to growth in the near future.
I understand entirely that what converted my right hon. Friend the Chancellor of the Exchequer—I am grateful that both sides of the House have paid tribute to the Chancellor as a man of integrity in this matter—was when he realised that, even with the low rate of growth that he had set his sights upon after July, 1966, imports were still coming up faster than exports. It was when he realised that growth would be as rapid or even better and with a secure balance of payments if we devalued that he took this decision.
I am surprised that the Leader of the Opposition chose to stand on a no-devaluation plank. I myself—I do not wish to do his job for him—if I had been in his position would have argued that this was not the right time, that it should have been done earlier. I would have argued that it was a miscalculation. To suggest that Britain would never contemplate devaluation as part of this long historical adjustment to a different international situation seems to me to be misleading, bad political tactics, and fundamentally to misunderstand the nature of this economic choice.
Having made those points in reply to the type of arguments advanced by the right hon. Member for Kingston-upon-Thames, I want now to turn to the more positive aspect.

Mr. Heath: I am listening with great interest to what the hon. Gentleman is saying. I find myself in agreement with an enormous amount of it. He has said that, in his view, the policy which we were pursuing at the end, through 1963


and 1964, could have succeeeded. I agree with him on that. It is the great tragedy of the last three years that for political reasons it has not been allowed to succeed. What the hon. Gentleman is omitting is that even in the circumstances which he is describing he is taking into account only fiscal and financial measures. He has not considered any other questions at all. My point has always been that, if the Government were prepared to take other measures—of taxation, trade union reform, and so on—they could have made a major impact on the situation.

Mr. Mackintosh: The point I made about the financial policy pursued by the last Conservative Chancellor of the Exchequer was that it might have succeeded, but it sailed very close to the wind. It sailed as close to the wind as the policy of the present Chancellor of the Exchequer in what he has himself described in recent months as "a tightrope policy." We are trying to edge round a corner to use yet another metaphor, a corner which is an extremely difficult one to turn. This is my reply to my hon. Friend the Member for Liverpool, Toxteth (Mr. Crawshaw), who wonders about there
being no assurance that devaluation will succeed. This is also a difficult policy but I think that it has much more hope of succeeding. I do not take the point that a change of Government destroyed the policy of the last Tory Chancellor of the Exchequer, because it seems to me that it was so fraught with difficulty that there was no evidence that it would have succeeded in any other circumstances.
As to the other aspects of the right hon. Gentleman's comment, I myself would like to see a number of fundamental changes in the whole dynamism of Britain's approach to our trading problems abroad, a subject which I shall refer to later. However, I do not think that by themselves they would have made any significant impact on our international competitive position in 1965 or 1966. I think that credit should be given to the Labour Government for the tremendous effort they have made to improve the structural, competitive nature of British industry. Their regional policy, their export encouragement policy, their productivity conferences—all these efforts represent the most determined effort in history to improve British industry in the direc-

tion the right hon. Gentleman wants. I do not accept that, for example, mere tax relief would have made a significant difference in this situation. It would at present, for instance, encourage domestic consumption when one of the things we want to do is to move consumption into the export field.

Mr. Boyd-Carpenter: Before the hon. Gentleman leaves the point of my argument which he was on, may I ask him this? In view of his very fair statement that what one might call the Maudling policy might well have succeeded, does he not attribute a great deal of weight to the confidence factor to which the Prime Minister himself referred on 23rd November, 1964, in the House as being the reason why a policy which might have succeeded was in fact undermined by the lack of confidence generated by his right hon. Friends?

Mr. Mackintosh: No, I do not. I do not attribute a great deal of weight to this argument, because when the Labour Government came to power there was tremendous international confidence. When there was difficulty immediately after we succeeded to power, there was the biggest demonstration of international financial confidence we have ever had in the support given to the £. This confidence argument will not work. The whole problem was simply the same old one that we did not sell enough abroad at full employment. At full employment our imports rose faster than our exports. Even that might have been adjusted but for the particular difficulties of the summer of 1966.
This, I think, must be faced, because if hon. Members pretend that there was an easy way out of this they are deluding themselves and the country. What we must do now is to persuade the people to accept the facts and the difficulties of the situation, rather than to suggest that one small fiscal change, one or two different postures or one international banker having a different opinion of somebody, would have made a fundamental difference to the situation.
I want now to come on to the more constructive aspects of my speech. How do we make this devaluation work?

Mr. Boyd-Carpenter: When the hon. Gentleman dismisses—

Mr. Speaker: Order. I have said before that I have no power to discourage interruptions, but there are many hon. Members who have sat here for two days trying to get in.

Mr. Boyd-Carpenter: I do appreciate that, Mr. Speaker. I shall be very quick. In discounting confidence factors, has the hon. Gentleman taken into account the fact that on 23rd November, 1964, the Prime Minister attributed the major trouble at that time to a lack of confidence?

Mr. Mackintosh: I do not discountenance confidence factors. I said that the Labour Government had tremendous confidence from the International Monetary Fund and from the people who rallied round us in the very large support operation which was produced for sterling at that time.
I come now, at last, to the more constructive part of my speech. How do we bring the present change in economic policy, for it is a change—it is a drastic change—to a successful conclusion? I want quickly to take up one or two points, because I appreciate that many other hon. Members wish to speak. There is one special field which has not been mentioned but which deserves consideration tonight. I refer to the question of home-produced agriculture and the whole point raised so brilliantly by my hon. Friend the Member for Birmingham, All Saints (Mr. Walden), that one of the major effects of devaluation is import substitution.
I beg the Chancellor of the Exchequer to consider seriously the possibility of bringing forward the Price Review this year. If we are to have a significant expansion in our agricultural programme, which we need as part of the whole package deal to make devaluation a success, farmers must be informed of the situation in time for them to plan their whole cropping programme, their planting programme, for the coming year. This cannot be done after March or April, when the Price Review figures are released. Therefore, if it is technically possible to bring the Price Review forward, I beg my right hon. Friend the Minister of Agriculture, Fisheries and Food, or my right hon. Friend the Chancellor of the Exchequer, when he replies,

to give some clear indication of their intentions in this matter so that farmers can plan their agricultural programme accordingly.
In particular, I beg them to remember that since the past Price Review agricultural costs have risen due to rising fuel costs, wages awards and increased fertiliser costs, already by about £32 million or £33 million, I estimate. Devaluation is a difficult matter to estimate in relation to the question of increased costs to farmers, but they will have extra fuel costs. They will have to pay extra for certain imported feed stuffs. They will have to pay a certain extra amount on fertilisers—phosphate and potash and a higher rate for agricultural credit. The estimate I have got from agricultural economists is that farmers will have to face between £17 million and £24 million extra on their total costs. Therefore, there is a total of about £60 million in increased costs as a burden on the agricultural community, and if we are to expand agriculture we must counterbalance this and provide a further incentive.
I am sorry to weary hon. Members with this subject, many of whom are not interested in it, but it is important to have this import substitution effect. If import prices for agriculture rise, this does not necessarily mean a rise in farm incomes. Where prices have been below the guaranteed level, a rise in import prices and, therefore, of domestic prices of agricultural produce means that the farmer will get the same, because all that will happen will be that the Exchequer will pay a lower guaranteed price.
This is an extremely complex problem, but to get an expansion of agriculture which could go so far as to save up to £200 million or £300 million on the import bill, there must be an expansion of farm incomes. Some people imagine that farmers are very rich people who roll around in Jaguars and send their children to fee-paying schools, but the fact is that farm incomes have been squeezed since the 1957 Act to the last Price Review. There has been a policy of squeezing down agriculture. Now there must be an injection of capital if this type of expansion is to be possible.
I wish to refer briefly to fisheries. It has always amazed me how little thought has been given by successive Governments to the fishery question in Britain. I have calculated as carefully as I can, and I find that we pay about £60 million a year for imports of fresh fish or frozen or dried fish which could well be caught by our fishermen. Yet we are not following a Conservative policy in fishing matters, nor, for that matter, a Labour policy. We are following the policy set out by the Fleck Committee of 1962 which said that the British fishing industry must be cut down steadily to some smaller unspecified size. I now hope that as most of our competitors in the fishery trade have not devalued and their products will rise in price, we shall pay more attention to an expansion of the fishing fleet and make an attempt at import substitution.
There are other fields in which we need to bolster and supplement this whole policy of devaluation, in which we need a change in attitude, an attempt to win markets abroad and an attempt to achieve a more dynamic policy. The Leader of the House, in his brilliant winding-up speech in the debate on the Queen's Speech, said that there were two or three aspects of life which worried people in particular. He mentioned the trade union movement structure, the structure of central and local government, and I think that he also intended to mention the structure of some aspects of our overseas selling capacity which has worried many of us.
Many of our exports are good, but many are not as keenly sold as they might be. What bothers me about these aspects of British life is that, having seen where we need to modernise and improve, the answer in every case is that change is difficult or the issue is in the hands of inquiries or Royal Commissions. We can do nothing about local government until two Royal Commissions report in December, 1968. This is an economic matter because it is local government which operates in the regions and which sets up the infrastructure. When local government breaks down, we cannot go on with our housing programmes, siting advance factories, building roads 
I do not accept that our central Government is overmanned. Successive

reforms have been put in hand by both parties in order to try to comb it out, but without effect. But it is over-centralised so that we have a pile-up of planning decisions in London. I know of a case where an industrialist who wanted to come to my constituency had to clear his case with the Board of Trade; the Board of Trade said that they would let him know in seven months' time, by which time his factory had been started in Holland.
The third area where reform is needed is the trade union movement. I want to see the trade union movement stronger and more effective. I do not like the situation which I have encountered in my constituency where I have had to try to
resolve a problem of mutual antagonism and misunderstanding and ultimate loss to both sides, to industry and the community. Yet we are told that nothing can be done about trade union reform because it is being studied by a Royal Commission and that nothing can be done about central Government reform because we are waiting for the Report of the Fulton Commission.
On the question of selling our exports, we shall do better as a result of devaluation. We shall expand. But we do not have the salesmen or the after-sales service or the packaging or the delivery dates which are necessary to take full advantage of this new approach. We are learning slowly and painfully that we are living in a competitive world, that we have to pay our way and that we have been consuming too much as a nation. It does no good for hon. Members opposite to pretend that this trick or that trick or this little bit of confidence or that would have altered the position. A far more fundamental change on the part of the Government and the community are required.
I welcome devaluation, not just because I supported it before the Government did but because I think it offers us a breakout not only of a financial restriction but of a psychological restriction. I hope that we can go forward with a dynamic effort and, as a nation, capture the initiative in world affairs.

7.45 p.m.

Mr. Ian MacArthur: I listened to the hon. Member for Berwick and East Lothian (Mr. Mackintosh) with the greatest possible


interest, and I agree with much of what he said. I shall return later to his agricultural points.
I appreciate the hon. Gentleman's argument about historical adjustment, but I am not sure that I would choose to apply that description to the recent pattern of events which have represented a defeat for the Government's policy, a complete reversal of everything that they have said, and a waste of three hard years for the people of Britain.
I was interested earlier to hear the Prime Minister make yet another rapid change in his exposition approach. On Sunday, he told the people of Britain that he would not blame the dock strike or the Middle East war; because he speaks frankly. He told us that he would not blame the speculator; because he is an honest man. He said that he would not blame the Tories; because he does not shirk responsibility. Yet this is precisely what the Prime Minister did today. He blamed the docks strike, the Middle East war, the speculators and the Tories. He threw in the Post Office scare and the Zinoviev letter for good measure. The Tolpuddle Martyrs are being held in reserve.
What the right hon. Gentleman did not do was to blame himself in the least. But it is on his shoulders that the responsibility must rest. The Chancellor of the Exchequer has honourably put himself under a suspended sentence of execution, but whatever happens—we might have expected it—the man in charge continues as before.
The hon. Member for Berwick and East Lothian referred to the need for an early statement on agricultural policy, and I should like to support him on that. The industry faces an enormous opportunity and challenge. For some years on these benches we have called for agricultural expansion. The time has now come when, even under this pressure, that opportunity must be seized. But I was disappointed to hear the Prime Minister today and the Chancellor of the Exchequer yesterday speak about the Price Review. Agriculture cannot wait until the Price Review to reshape the pattern of agriculture next year.
Farmers cannot change their farming plans with the same giddy speed with

which the Government change their economic policy. They need much longer time, and I hope that the Minister of Agriculture and the Secretary of State for Scotland will make an early statement, certainly well before the end of the year, so that farmers will know on what basis to make their plans for next year. At the same time, I hope that we shall have some estimate of what the cost of the measures of these last few days means for farmers.
The hon. Gentleman rightly called attention to the steep rise in the running costs of farming over the last year following the rising costs of previous years. There is also the problem of the extra credit cost to the farmer presented by the 8 per cent. Bank Rate. This may be a very heavy figure indeed. I hope that either the Minister of Agriculture or the Secretary of State for Scotland will make an early statement to the House on this matter.
I wish to call attention to the effect of devaluation on three Scottish export industries for which there is an equivalent situation, I imagine, in England. The Government have been far too optimistic in their assessment of the opportunity which devaluation provides for these industries, just as they have been far too evasive about the problems which the deflation which accompanies devaluation will present to the people. The three industries to which I wish to refer briefly are the wool and textile trade—and I include in that woollen garments—shipbuilding, and the whisky trade, which is always close to the heart of every Scottish Member.
The woollen garment and textile trade draws the bulk of its raw material from countries which have not devalued. Australia, which is the source of the fine wool, the Botanies which make up so large a part of the Scottish woollen export trade, has not devalued and, therefore, the increase in the manufacturing costs of these garments will increase sharply. I understand that over the whole of the woollen trade the cost of the raw material, the wool, represents about half the price of the finished article.
But that is not the whole story. When we come to the garments which are particularly strong in our export markets—that is, the luxury end of the trade—finer and more expensive wools are used. I


quote as an extreme example the cashmere trade from the Borders of Scotland. I need guidance on this, but I imagine that the cost of the cashmere in a cashmere garment is not less than three-quarters of the price of the finished article.
Therefore, the effects of devaluation will cut both ways. There will be a substantial increase in the selling cost of the garment because of the rise in the cost of the raw material from which it is made, and that must, to a large extent, erode the advantage of the currency devaluation which faces the exporters of those garments.
Another consideration is that the woollen trade—certainly, the garment part of it—depends particularly on a strong home market for its research and experimentation, and, very largely, for its profits, because selling garments abroad is not a profitable business on a unit basis. In the home market, the woollen business will face greater—anyway, certainly not less—competition because of the growing competition over the last few years from man-made fibres which generally will not have to carry the added import costs with which the woollen manufacturers now have to cope.
I pass to the second industry, shipbuilding. Some early reports after the statement on Saturday painted far too rosy a picture. There were reports about the great opportunities which lay before the industry. I am sure that Scottish shipbuilders will not be slow to seize any opportunity presented to them in these hard times. I want the Government to tell us the position of those shipyards which tendered for ships now under construction in the belief that they would receive an export rebate. I understand that the export rebate is to be withdrawn on 1st April. Many of the ships will not be completed by then, but in the contract price an allowance was made by the shipbuilding firm for the export rebate. Therefore, what will happen to these firms? What will be the viability of the industry when this critical aid to it is sharply removed?

Mr. John Tilney: That applies not only to ships, but to a great many manufactures.

Mr. MacArthur: I agree. I shall come to that point. But in view of the critical

state of the shipbuilding industry, the export rebate has a particular significance. Perhaps the Minister, in his reply, will tell us what will be the future of the shipbuilders' relief scheme, which is very important also. Perhaps he will also tell us something about the credit position which plays such a large part in the shipbuilding industry.
I come to whisky. Here, too, there has been some excitement about the new prospects facing the whisky industry abroad. The whisky industry also is not slow to seize export opportunities. Its export record is second to none. But there has been loose talk about devaluation meaning a reduction of 14·3 per cent. in the selling price. Of course, the reduction will be nothing of that sort. The export price for a bottle of whisky is not 50s., or the equivalent price at which it is sold abroad, but about 7s. 6d. The rest is duty imposed by foreign Governments, just as the Government in this country always impose heavy duties on whisky.
The return to Britain from the sale of a bottle of whisky is about 7s. 6d. Devaluation means that it will fall by about 1s. Therefore, the margin of advantage given to the whisky industry is about 1s. a bottle—that is all. We have no idea whether the benefit of that 1s. will be passed on to the consumer who buys the whisky. How much of the 1s. will importers of whisky abroad keep themselves? We cannot control that from this country, and the Scottish whisky trade cannot control it. What will be the effect on the price of a nip of whisky in a New York bar? I should have thought that it would be negligible.
We should not make too optimistic noises about the prospects facing these three great Scottish exporting industries. I agree that they will have opportunities, but they will also face a host of problems as a result of the associated measures announced by the Government.
As my hon. Friend the Member for Liverpool, Wavertree (Mr. Tilney) said just now, many of these considerations apply to all exporting industries which will lose the export rebate, which face the problem of the extra Corporation Tax, which have to cope with the highest Bank Rate for half a century and which face the prospect of wage claims which will be promoted by the provocative increases


following the Government's action in raising everyone's cost of living.
The Government have made far too little of the effect of devaluation on the cost of living. I doubt whether the increase will be contained within the 2½ or 3 per cent, which has been quoted. The Government always under-estimate the impact of their economic measures on the cost of living.
What will be done about wages? When winding up the debate last night, the Secretary of State for Economic Affairs—and it would be charitable not to comment on his speech—said:
…we cannot allow money incomes to increase simply to compensate for the rise in the cost of living."—[OFFICIAL REPORT, 21st November, 1967; Vol. 754, c. 1268.]
My right hon. Friend the Member for Leeds, North-East (Sir K. Joseph) intervened to ask what he meant by "we cannot allow…"The right hon. Gentleman said that that would become perfectly clear as his speech continued. It did not become perfectly clear.
That is a question which must be answered. It must be answered tonight before the Division so that all hon. Members know where they stand on what will be one of the central problems confronting the economy over the next few months as the full impact of devaluation and deflation is felt in the country. The right hon. Gentleman's speech yesterday answered no questions apart from one at the beginning. All it did was to make the murky waters of Government policy even muddier.
I also want to know something about the effect on Scotland of the other measures announced by the Government, because we are also debating them. Where will the cuts fall and what is their extent? Is it £400 million or £1,000 million? If one adds on the £600 million we have already been promised, what is the total? Where are they to fall? Where will the axe be?
The Prime Minister said today that houses, schools and hospitals would not be affected. But, of course, they will be. The cost of every house, hospital and school will go up as a result of devaluation. What does "no effect" mean? Shall we have the same number of

schools, houses and hospitals as planned, or will the numbers fall? Will the total costs rise? If so, how will the increased costs be financed? Where else will the axe fall?
There was talk today from the Prime Minister of cuts in local authority expenditure. We want to know where they will be. When the Government were asked about this yesterday the Secretary of State for Economic Affairs said that this was not the time to give the answer. It is the time. We want to know before the Division tonight.
We also want to know what form the shelter for the hardest-hit will take. Asked about this today, the Prime Minister said, "Yes. I will answer." He read out—word for word, I think—that part of the Government statement last Saturday circulated in the OFFICIAL. REPORT on Monday. There was not a word of explanation, but just a passing reference to the retention of the major part of the social services. What does that mean? What about the minor part? Is there to be selectivity? Are there to be cuts? We must know in the reply tonight. What are the "steps that may be necessary"? The Prime Minister said that it would be irresponsible to say anything about this. But it is the height of irresponsibility to say nothing about it in this critical debate.
The Prime Minister said that he could not say anything because the impact of devaluation on living costs had not been worked out. Yet he has been telling us that he knows precisely that it will be only between 2½ and 3 per cent. A major claim of the Government throughout the argument has been the meticulous care with which they planned every stage of the operation day by day over a matter of weeks. Have they not considered this point yet? Do they not know what the impact on the cost of living will be? Have they not given thought to what they will do to protect the worst-off people, for whom they pretend to have such concern? Why do we not hear about these things in the debate? Are we to hear from the Chancellor? If not, we shall have to believe that the Government have no answer to the questions about where the cuts are to fall, where and how the shelter is to be provided, for fear of frightening away even more of their supporters on the benches behind them.
What shelter can we expect for the development areas? We have heard this word from the Prime Minister before. He promised Scotland shelter in July last year, and the shelter he provided was a 48 per cent. increase in the number of unemployed. He claims that as a victory since in London and elsewhere the unemployment rate went up by even more. The Scots did not regard that as the sort of shelter they expect. We know that the regional employment premium is to be retained, but there are wiser ways of using that money than through a wages subsidy.
What else is being done? Are the Government aware of the full impact on Scottish life of the increase in Bank Rate and the cost of living in a country where it is already higher than it is in England? Has the Prime Minister considered what the effect of holding down wages will be in a country faced with a rise in the cost of living when the level of wages is already lower than it is in England? What will the Government do to bridge the wages gap? What will they do to meet the problems in Scotland of the increase in the cost of petrol and transport that will follow devaluation? Will they introduce the regulator, as they could, to reduce petrol duty in Scotland, and provide some easement? How can they justify the introduction of the crazy Transport Bill, which will add so many millions of pounds to the cost of transport in Scotland?
The Prime Minister likes using colourful phrases to try to hide the drabness of the future which faces the people. His latest pet word is "straitjacket"—language of the asylum which fits the economic bedlam in which we have been living for the past three years.

8.5 p.m.

Mr. Ted Fletcher: I do not intend to take up the points mentioned by the hon. Member for Perth and East Perthshire (Mr. MacArthur). He says that my right hon. Friend the Prime Minister uses colourful language, but I am afraid that that cannot be said of the hon. Gentleman in his speech, which I thought was very drab and unenlightening.
I want to refer to a significant speech made by the hon. and learned Member for Darwen (Mr. Fletcher-Cooke), who spoke about the advisability of wielding the

Geddes axe. My memory goes back to the financial crisis of 1931, when the £ was under attack and, as a condition of lending money to the Government, the international bankers stipulated that there should be cuts in unemployment pay. Some hon. Members will recall the establishment of the May Committee and the introduction of the means test, which is an emotive phrase even today in our Labour movement. Married men on 17s. a week were thrown off the Labour Exchange and had to be kept by their sons and daughters who were at work. That is the effect of the Geddes axe. One had thought that we had made some progress since those days. Keynes and other economists have told us that mass unemployment is not the answer. Yet we had a backwoodsman from the party opposite expressing what I think to be a substantially-held point of view on that side of the House that once again the answer to our problems is the creation of more unemployment.
On every occasion the working class has had to take full responsibility on its shoulders for solving the crises of capitalism. I see in devaluation a way out of this log-jam, so that once again we can get vitality into the economy and escape from the straitjacket of being in pawn to international financiers—I use the phrase deliberately.
I agree with the Government's general measures, but I want to concentrate specifically on the economies they intend to make in military expenditure, which, we are told, they intend to cut by £100 million. We were told, in reply to a question by my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot), that it is not a paper cut but will mean a real economy. That is welcomed by many hon. Members on this side of the House. But we must ask whether it is possible to cut more than £100 million. We have orders worth £1,000 million for military equipment in the United States, and devaluation has meant that that bill will rise by £150 million. Is it not possible to review our military purchases from the United States? For example, is it too late to do something about the F111A? We might well have to make some financial sacrifices, but in the last analysis it will be cheaper to cut these expensive commitments and evolve a military strategy designed not to police


the world but to defend our shores from attack.
Have the Government appointed a committee to review the terms of our contracts with the United States for the purchase of weapons? When we are talking of defence, we must ask ourselves whether we intend to do anything to bring troops back from Germany. We have entered into commitments to station four divisions in Germany until the year 2000. It now costs us 15 per cent. more to keep every airman and soldier in Germany. Is this not an ideal opportunity for the Government to accelerate the withdrawal of troops from Germany? Are any conversations being carried on with the Germans with a view to offsetting the additional costs of 15 per cent.? Here is an ideal opportunity for us to scale down our commitments in Germany. Anyone with any military knowledge knows that our troops are stationed in Germany in a situation in which they will not be needed because the possibility of a European war is remote.
I was very pleased when the Prime Minister announced that we are not going forward with the expenditure on Aldabra, which my hon. Friend the Member for West Lothian (Mr. Dalyell) has said could be as much as £20 million. That is welcome news, certainly on this side of the House. I wonder whether similar action is being taken with regard to the base at Bahrain when we leave Aden? Do we still intend to pour money into a military settlement there when in a few years' time we may be operating in a hostile climate, in the midst of local people who do not want us, and have to face the same problems as we are facing in Aden. May this be looked into?
I am devoting these few minutes to the subject of defence expenditure because I believe that it is the root of our balance of payments troubles. Look at the situation in Europe. France has no balance of payments problems. She has probably the biggest balance of payments of any country in Europe. The reason is plain. France spends 4 per cent. of her national gross product on armaments. We spend 6½ per cent., more than half as much again. The French have no international commitments, having pulled out of Algeria and Indo-China, as a consequence of which they do

not have to face the problem of policing the world. This applies to West Germany, and also to Italy, which is spending less than 4 per cent. of the gross national product on arms. Our difficulty has been that we have overstretched our resources and have not come to terms with the twentieth century. We think in the military terms of the nineteenth century and of policing the world.
It seems to me that we ought to examine our military commitments and recognise that policing the world is a collective responsibility and that our responsibility lies in defending these shores. So I believe we must look again at our military expenditure. We are told—this is a glib phrase from the economists—that we are consuming more than we are earning. This is true. But when this is put to the man in the street as a consumer, he thinks that one is referring to the food that he consumes, his television set and his refrigerator. But as a nation we also consume the Polaris submarine at £34 million; that is part of our national consumption. When we talk about consuming more than we are earning, let us look at these items of consumer spending that do so much damage to the mass of our people. This is a form of consumer expenditure that we can well do without.
Speaking about speculation, the hon. Member for the Cities of London and Westminster (Mr. John Smith) made the point, with his vast experience of the City, that it was a good idea to encourage hot money to come into the City of London. I intervened to ask him who had gained the money if Britain had lost £300 million or £150 million as a result of speculation, and the answer was that it had been gained by the speculators, a good many of them British speculators, perhaps dealing through their brokers in Switzerland or the Lebanon.

Mr. Michael Hamilton: Since my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith) is not present, it should be made clear that what he said was that he considered that hot money was better than no money.

Mr. Fletcher: I put to my right hon. Friends on the Government Front Bench whether we ought to allow the City of London to accept money on very short-term rates. For instance, the Swiss banks


have kept themselves out of the rates of interest war because they do not accept money on deposit unless it is left for 28 days. If someone withdraws a deposit before the 28 days are up he has to pay a penalty. But in the City of London one can deposit money for one day or three days. As a consequence the speculators are making a harvest out of our financial difficulties. I suggest that the Chancellor of the Exchequer might look into this and tell the City of London that we must do the same as the Swiss bankers and financiers and not accept the hot money.
I want now to say a word about our regional problems. I believe that devaluation will give us the spur necessary to increase our exports so that we may have an export boom and full employment and maintain and increase the standard of living of the mass of the workers. I do not agree with hon. Members opposite who say that devaluation must necessarily lead to deflation. The trade unions will see that it does not. If the cost of living goes up the trade unions will want an increase in wages. No mistake should be made about that. The trade unions will, rightly, want a share in any increased prosperity.
I believe that devaluation can give us an increased standard of living if we put our backs into the export drive and seize our opportunities of producing at competitive prices things that we have bought abroad in the past. I believe that an opportunity will exist for a big expansion in our economy. The trade unions will no doubt fight to keep wage rates in line with increases in the cost of living and get some part for their members in this fight for increased prosperity. I believe that this will be done. But in the regions —I speak as a representative of a constituency in the North East—our industries are basic ones and not based to the same extent as those in the Midlands and the South on durable goods that can be exported, such as motor cars. We recognise that if the economy suffers a setback the regions are the first to feel it. The Government have for three years tried to induce private industry to go to the regions. I believe that the Government must as quickly as possible go in for capitalised State industries. State-owned industries should now be operating in the regions. Ministers should have in their offices committees looking into the possi-

bilities of capitalising State-owned industries, how to capitalise them, what workers are needed, what the prospects are for selling the goods, and so on. This is a priority in the regions.
We have endured a long period when Ministers have been pursuing policies that have received support from the Opposition. This disturbs me very much. I had a grandfather who was a pioneer in the Socialist movement, and in my youth he warned me, "If the Tory Party ever praises Labour Party policy, then you must look at Labour Party policy again because you are on the wrong lines." He was not a theoretician, but that was wisdom. We have had a long period of Butskellism. We seem to be in danger of getting in the immediate future what I would call Callamacleodism. We had a consensus between the two Front Benches about what was needed to save the £. I am very glad that at least one thing to have come out of devaluation is that we have started fighting again.
We have said that it is intolerable to have a system of industry in which, at least until a few months ago, 98 out of every 100 people are employed in gainful industry, digging the coal, making the steel and driving the trains, and yet, because some small Arab country withdraws its reserves from the Bank of England, or 10,000 people strike, out of a working population of 23 million, the £ is endangered and the whole gearing of the economy goes wrong and we have to talk about falling back and deflation and high Bank Rates and stopping production and so on. What a crazy society we live in. One of the good things to come from devaluation is that we are beginning to realise that the producers are the people who matter, whether manufacturers or workers, and not the people who deal in scrip, whether in the City of London or in Switzerland.
I think that it was Aneurin Bevan who said that if one coal miner died, the country would suffer the loss of the coal which he would have produced, but that if all the financiers died tomorrow, industry would still go on. That is perfectly true. We have made a fetish of the £ and of the importance of the man producing the scrip. It is like trying to run a railway and, having engaged all the engineers and drivers, saying that the most important man in the system is the


man who prints the tickets for the passengers.
That is exactly the position of our economy when, because of the self-importance of the City of London, which has been established by subtle propaganda year after year—and some of my right hon. Friends have fallen for this propaganda—it is believed that the financiers are the important people in our society. The important people are the miners and the people in the factories and in the communication industries. It is those who produce the real wealth. They are the people who have to struggle hard, as the dockers and seamen have had to do, in disputes about 6s. a week and who have read in the newspapers about financiers making in 24 hours a profit of £150 million as a minimum and, according to the right hon. Member for Enfield, West (Mr. Iain Macleod), perhaps as much as £1,000 million over the past two or three weeks. These people can pick up a telephone and on speculation and guesswork can suddenly find themselves worth hundreds of thousands of pounds more the following day.
What sort of casino society is it when a docker has to strike for eight weeks over 4s. and we tell him that he is damaging the economy? The people damaging the economy are those who are speculating and making profits out of the dilemma in which my right hon. Friends find themselves. These are the super patriots who put profits and earning a dishonest penny before the benefit of the country. Devaluation will put these people in their place. We can forget financiers and the balance of payments—we cannot forget the balance of payments, but we can certainly forget raids on sterling, at least if our economic priorities are right.
I am fully behind the Government's decision to devalue, although I think that they have done so too late. I ask them to do two other things. First they should consider putting a further restriction on the export of capital to developed countries such as Australia and South Africa. Secondly, I ask them to consider imports of things like comics from the United States or gambling machines, the one-armed bandits, imports amounting to £17 million a year. Is it not possible to stop such imports for which we have to pay dollars? We may be bound by

international agreements, but there are more ways of killing a cat than strangling it. Why should there not be heavy taxes on these items? Why cannot Purchase Tax on gambling machines be increased?
I wish the Government well and I shall be behind their striving to increase the export drive. I hope that they will consider some of the things which my hon. Friends and I are advising and I hope that a consequence of devaluation will be that we will have that vital starting-off base from which to make our economy viable again.

8.25 p.m.

Mr. John Tilney: As many hon. Members still wish to speak, I shall make only two comments on the remarks of the hon. Member for Darlington (Mr. Ted Fletcher). If one wants to get into Europe, it is folly to withdraw our troops now. If we get a denial for good, we may have to think again, but to do so now would be utter folly. Secondly, the main if not the only speculators, as was made crystal clear by my hon. Friend the Member for the Cities of London and Westminster (Mr. John Smith), were not British. They were foreigners, the foreign banks, from the Iron Curtain banks to Arab banks, to African and American banks, all because of the folly and delay of the British Government.
We fought the elections of 1964 and 1966 telling the electorate that the £ would be endangered if Socialist policies were persevered in, but a Socialist Government were elected. I have no pleasure at all in saying that we told the public so. Unfortunately the public believed the Prime Minister not once but twice. It is astonishing that it should have done so.
I agree with what the hon. Member said about production. I believe more in Keynes than in Montagu Norman, but production has to be of the right thing at the right time and at the right price and it is not easy for a small and over-populated island which depends for its prosperity on trading in competition with all other nations.
I want to make only four points. The hon. Member for Darlington does not believe in invisible exports, although throughout the last century, with the exception of two years, they have balanced


the accounts of Britain and enabled us to have a high standard of living.
The action which has just been taken by the Government is grossly damaging to our income from invisible exports. The President of the Seed, Oil, Cake and General Produce Association of Liverpool came on the telephone to me this morning. He is Mr. Michael Holt, who happens to be a colleague of mine on the board of John Holt, which is not affected. He was speaking as President of the Association, and he was also speaking for the Cocoa Association of London, the International Oil Seeds Association and the Oil and Tallow Trades Association of London. The effect of devaluation on the commodity markets of Merseyside and London is catastrophic for some firms. I know that hon. Gentlemen opposite think that all those who deal in commodities and metals are doing well out of devaluation, but may I tell them what has happened?
Nigeria produces groundnuts, cotton, palm oil, palm oil kernels and cocoa. For many months now, the Nigerian Government have insisted that all purchases should be made in Nigerian £s, yet nearly all their sales come through this country. We have made a bit of a profit in British £s out of buying their produce and selling it to the markets of Britain, Europe and elsewhere. The Government have devalued our British £. The Nigerian Government have not devalued. It has been impossible to buy the Nigerian £ forward and in quantity, although Biafran ones have been offered at an enormous discount. Certainly the Lagos Government would not have taken them. There is no money market in Nigerian £s. I am told that the result is that the cocoa merchants alone are likely to lose £½ million, and the other merchants very large sums of money, and many of them will become bankrupt because of the Government's policy.
Not only is it bad for them to lose that amount of money, but that market looks like being cut to something very small, and the invisible profits which have been gained by this country in the past may go for ever.
My plea to the Chancellor of the Exchequer is that he will consult with the Nigerian Government who, after all, have a considerable interest in this market, to see whether contracts which have been

entered into in good faith with their National Marketing Boards can be continued at the old rate of exchange.
My next point has been referred to already by my hon. Friend the Member for Perth and East Perthshire (Mr. MacArthur). The Government talk constantly about the need to increase exports, yet they have done away with the machinery of export rebate. I have a Question down to the Chancellor about it, and I wish to pay tribute to him for asking his Parliamentary Private Secretary to see me last night when he observed that I was trying to intervene in the speech of the Secretary of State for Economic Affairs.
It is immensely important to many industries to know when the export rebate will end. We are told it will end on 1st April, but, as my hon. Friend the Member for Perth and East Perthshire has said, not only ships but a great many manufactured articles have been contracted for, and are being contracted for as I speak, for delivery in, say, 12 or 18 months' time. What action will be taken to protect them?
I have received a letter from the chairman of a comparatively small company which is selling between 75 and 80 per cent. of its products abroad and has contracts now worth £1½ million. He writes:
The position in respect of existing export contracts is exacerbated by the inevitable increases in costs with which we and much of industry will be faced under the obvious headings of increased costs of imported raw materials, withdrawal of S.E.T. premiums, increased finance charges, increased overseas travel and operating costs, quite apart from wage increases due to increased costs of living which will undoubtedly come into effect during the course of completion of long-term contracts for capital equipment.
I hope that the Chancellor will be able to say something about that.
Could he say why we have been told by those abroad, apparently, to do away with the export rebate? Was it cutting into their trade? The Chancellor of the Exchequer implied that in one of his answers last Monday. France has a value-added tax, which, I am told, produces an incentive of up to 20 per cent. to export rather than to sell at home. All countries of Europe that have such a tax have an equal incentive, and I understood that what we want all the boards of all the manufacturing companies in this country to be thinking of is how to sell


the exports. One will only get them thinking that way if they are given an incentive. Yet the Government have now apparently taken away an incentive which, in my opinion, was already too small and should have been increased. I only wish that when we were in power the Government had produced such an incentive. We were told by the Chancellor of the Exchequer when it was introduced that this could be done under the rules of G.A.T.T. Why has it been withdrawn?
My third point is: would the Chancellor consider reducing the rate of interest on exports which are sold on a 180-day credit basis? He already produces interest at 5½ per cent. for exports that are sold on a two-years' or above credit. Is it not better for England that we get paid quickly and, therefore, should there not be an incentive, if possible, to get one's money in quickly? It is very much easier to do that if the rate of interest is 5½ per cent. rather than 9 per cent., as it will be in future.
My fourth and last point concerns confidence. Overseas confidence in this country has gone. One has only to look at the prices of Government stock. In my youth in business Government stock gave a yield far smaller than that on any equity investment. I believe that was right. The equity investment took the risk and, therefore, one expected a bigger yield. What is the position now? The Government credit is so bad that it is on a level with that of South American States in my youth and the rate of interest that they have to pay is double what anyone gets from an ordinary equity investment.
My worry is that this will not be put right by the policies of the present Government. I cannot see confidence returning overseas, especially after the two speeches of the Prime Minister. One has only to look at the American premium. People are still paying over 25 per cent. to buy enough security dollars to get their money out of this country even at the present devalued rate, and that is a very alarming position indeed.
I am even more alarmed at the possible effect on the savings movement internally and what will happen owing to the inevitable rising prices. People will say to themselves. "Rather than have our

money in the Post Office or the Trustee Savings Bank or even in Government stock, if we are to save for a house, is it not better now to try and buy the carpets and the furniture and find some place to store them than trust this Government with our money?"
It is a major indictment, an indictment which has already been heard from the hon. Gentleman, whom I hope I may ultimately call my hon. Friend, the Member for Liverpool, Toxteth (Mr. Crawshaw). I happen to live in his constituency. He made a very brave speech castigating the ineptitude of this Government. It seems to me that Socialism has utterly failed. It may be that Socialism is a good philosophy for some inland country which can produce everything that it needs, but, in my opinion, it is the worst and the most evil medicine that this island can ever have.

8.40 p.m.

Mr. Robert Sheldon: The hon. Member for Liverpool, Wavertree (Mr. Tilney) talked about people abroad lacking confidence in Britain. I find this surprising, because during the last 12 to 18 months we have been able to raise large sums on loan, purely on their trust in our Government, and the fact that they are prepared to continue this kind of support is, I think, the strongest sign of continuing evidence in the Government's ability to do what they have to do at this stage.
During the last 20 years or so there have been some fundamental changes, and we as a country have not responded fully to them. Some see these important changes as the decline of coal and shipping, and the increase in oil imports. I see them rather as the loss of Empire, and the rapid decline in Commonwealth trade whereby we were not able to influence so much of the trade with the Commonwealth countries.
The second one which I list is the increase in the cost of defending the Commonwealth as it changed from being the Empire. At one time the Empire more or less paid for its own defence, but now we have to pay for it. As a result, Government overseas expenditure has increased from only a few million £s a year in the inter-war years to a total of £470 million a year now. As the devaluation process works its way through, and if


we spend no more, our Government's foreign exchange spending will be increased by £80 million, which means that we will have to reduce the cost by that amount to get back to where we were. When we compare our position with that of France, which has achieved an approximate balance, and with Germany and Japan who make a profit on this kind of transaction, we realise that by comparison with our main trading competitors we are at some disadvantage.
The Government could have adopted the solution of imposing import controls. At one stage I believed in import quotas and for some considerable time I thought this to be the answer, but I think it ceased to be the answer as our difficulties became greater. It ceased to be the answer when it became a possible pre-hide to devaluation.
The other possibility was to adopt the system of prior deposits, a solution which at one time was favoured by the right hon. Member for Barnet (Mr. Maudling) and others. The idea is that before making purchases an importer has to deposit a certain amount of money with the Bank of England. By varying the
proportion which he has to deposit and by varying the period for which he has to deposit it, we can set up a strong discouragement to import. This method reduces liquidity, and it reduces the incentive to import.
We know that it worked well in Italy and South America, but I believe that it has less chance of working well in this country. We have a highly organised banking system. Money is readily available for profitable uses, and a profitable importer would have little difficulty in obtaining the necessary finance. Secondly, at this stage we can hardly proceed with doubtful ventures. We need certainty, and I believe that devaluation is the nearest approach to certainty that we can obtain.
One of the problems of the last 15 years has been to increase productivity and growth, but, oddly enough, I believe that this is not really a big problem. At some periods we have achieved a rapid rate of increase in productivity and a rapid increase in growth but the difficulty was that, as soon as this got under way, our position was so constricted that we had immediately to slap on the brakes

because our balance of payments position was in difficulty. If we were ever to get out of this narrow constriction, the breakout had to be led by exports, It had to be in the context of a moderate amount of consumer spending, so that, as the growth got under way, home trade was not given preference over exports.
But, of course, that is just what happened. The home trade was given preference over exports. Whenever the growth pattern got under way, we had greatly increased importation to satisfy home demand and reduction in exports. This process occurred in 1952, 1953, and 1954, when we got increases in productivity of 4 and 5 per cent. which could have been the beginning of our own economic miracle.
But the exports were not there, home consumption was high and the imports came in. So the process had to be stopped. It had to be stopped again following similar increases in productivity in 1959 and 1960. We saw a massive increase in productivity again in 1964 over 1963. It rose by seven points. These were massive increases in productivity but they never led to the take-off point, because we were fully extended. The imports came in and manufacturers found it rather easier to sell to the home trade than to export.
We had fundamentally to break out of this cycle. We had to increase exports and reduce imports. This, I believe, is what devaluation gives us a chance to do. I believe that productivity will go up as a result of the growth which can come and that it can be sustained. The difficulty has been in the past that we have been stranglers of our own economic miracles. The shame of the Tories in that period, when they had the same economic chances as other countries had —and those countries used them—was that they failed because they did not put exports first, because they allowed consumption to be high, because they were more concerned with winning general elections at critical points in the cycle of production and expansion.
At this stage we hope and expect that devaluation will lead to increased exports and here I want to comment on the disadvantages of constantly berating exporters. It is more than just a question of patriotic duty. That is not likely


to sell very many more exports. We also have to consider the question of importers, whom we do not call unpatriotic. This kind of emotional response should be reduced.
What is most depressing for the exporter is to be alone in a town and spend his time in a wretched hotel without an order in his pocket because his prices have not been competitive. Give him a chance to offer competitive prices and get his orders and he will start enjoying his exporting. That would be far better than any kind of exhortation.
The alternative for the Government in this instance was, of course, the possibility of going for a loan and coupling with it very heavy deflation without seeing the way ahead. In this instance, I have something to say on behalf of myself, because some reference has been made to the Private Notice Question I put down last Thursday. There has been a great deal of misrepresentation on the benches opposite and I am sorry to say, there has been some by hon. Members who might be expected to know rather more of the facts.
There were what I considered to be reliable reports and one could not assume, in the absence of any attempts to dissuade me that the House should not have the opportunity to debate the proposed loan which I felt to be an extremely important subject. If this is considered irresponsible, I must say that I felt that this might well be a watershed in the history of the Government and one that ought to be considered before the decision was irrevocable. But the Government, as we know, decided to devalue and I believe that this now gives us enormous opportunities to break out of these constructions. The deflation of the past—

Mr. Alfred Morris: Before my hon. Friend leaves that point, will he agree that the experience of last week argues strongly the case for the Swiss 28-day rule to distinguish between those who speculate out of genuine commercial interest and those who deal in hot money and are compulsive gamblers? Would he agree that what we need is a kind of "Gnomes' Law".

Mr. Sheldon: I am interested in this, and there is some value in the idea. The City of London is fairly well equipped to look after short-term loans, although further examination of my hon. Friend's suggestion might be warranted. If we had wanted to negotiate a loan and couple it with deflation, we would have had a continuation of the previous arrangement which resulted in higher unemployment than any of us want to see.
The level of unemployment which we have does not result in more efficient work but in the fear of the sack, which our past experience has shown gains nothing. The transfer of these people into export industries cannot come about because of unemployment alone but must be created by other means whereby manufacturers can export advantageously. The most important thing about unemployment, and
something which the last 15 months has taught us, is that it has been no solution. In those 15 months high imports have been maintained, exports have not risen as was hoped and productivity has increased only slightly, with strikes continuing and, worse of all, balance of payments difficulties.
One of the lessons which I hope will be learned is that, in future, anyone who seeks a solution based on unemployment will experience a similar disappointment. A similar operation in the 1930s did not work and it will not work now. The discredit of the theory applies today as it did 30 years ago and, if our difficulties are to teach us any lesson, it is that we have brought up to date the disadvantages of creating unemployment and have shown any future Government that the road through unemployment leads to no increase in growth but to difficulties graver than the problems which those who advocate the policy expect it to solve. Anyone who advocates a similar solution in future must be reminded of this.
By this devaluation we have created a new framework of economic policy, within which our aims and ideals for the benefit of the people may be realised. I recall the French devaluation and Frenchmen's accompanying cries of shame and disaster. The French are a proud and noble people, yet they used these expressions. I am sorry to hear the same sort of language today. France then was technologically backward; her exports were over-priced and she had all the great disadvantages which we are supposed to


have had on a larger scale. The fact that the French could overcome them by means of devaluation is one indication of its usefulness.
Now that we have devalued, we are starting again from scratch. The legacy of the 13 years are now ended, as a result of this, we can now go on to great achievements for our party and our country which are still possible.

8.55 p.m.

Mr. Michael Shaw: In the five minutes available to me I hope that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) will forgive me if I do not follow him in any detail. I want to take up two points that he raised. I was most interested, as I am sure the whole House was, to hear from him that no attempt was made to dissuade him from putting down his Question. Frankly, I find this absolutely unbelievable. I hope that we shall hear something more about it tonight. The second point is that he said that we had, over the last 18 months, raised large sums of money and that we still seemed able to do so.
Again, the idea that our credit in the world remains untarnished seems almost unbelievable and particularly unbelievable that such a view should come from from anyone in this House. The truth is, as the Member for Birmingham, All Saints (Mr. Walden) said yesterday, that people
put money with us because they are getting something out of us".
He went on:
As far as I am concerned, the motto is caveat emptor; they put it with us because they thought that they could get something Out of it. They have made a commercial judgment".
My goodness, a commercial judgment about the probity and integrity of this country! Their judgment was that in spite of present difficulties this Government, this country, could be relied upon to honour their undertakings.
I am sure that having heard those words, caveat emptor, they will think of another phrase or two to follow it. The first is that one learns by one's mistakes and secondly "once bitten twice shy." The final lesson must be, I hope, that in the long term one can trust this country. I hope that the country will learn that it can never trust a Labour Government.
We are right to have concentrated upon the past in this debate. We on this side have been constricted because we have not been told what future programme the Government are proposing. I hope that we shall have more of that tonight. Really, this is an inquest on three years of Socialist government, three years that have now been admitted to have been wasted and to have been a failure. We were expanding in 1964, and that is the real difference between then and now—the fact that production in 1963, 1964 and early 1965 was going up exactly as my right hon. Friend the then Chancellor said it would go up.
This showed that we had the confidence of those people abroad who lent us money, exactly as a business, when it wants to expand, goes to its bank and says that it has plans for expansion, it wants more money for its stocks, for new machinery, to finance its creditors temporarily until it has built up its level of production.
Provided that the bank has confidence in the business it lends the money, but sooner or later the bank demands a balance-sheet and that is what has happened now. In looking at this last three years' balance-sheet what do we find? Instead of money being loaned freely and voluntarily, and with confidence to this country, to allow it to expand, it has been loaned so that we can stand still and stagnate. What is the position now? We have now come to the position when we want to expand, but the bank has become doubtful of our ability in the future.
This is the time when we ought to have been able to go to the rest of the world and ask for more money because we intended to expand, but this is the time when we now look at the balance-sheet and see that that money has been wasted. This is truly an inquest on these last three years. Right hon. and hon. Members opposite have failed in the task they promised to carry out as a Government. They have failed, and I agree with my right hon. Friends that they should get out.

9.0 p.m.

Mr. Anthony Barber: As the House probably now knows, my right hon. Friend the Member for Barnet (Mr. Maudling) had hoped


to have returned from New Zealand in time to listen to the opening speeches of today's debate. Unfortunately, the aircraft in which he was travelling—not a B.O.A.C. aircraft, I am happy to say—was delayed so, in Ministerial jargon, I have been asked to reply.
My first and my happy task is to congratulate my hon. Friend the Member for Cambridge (Mr. Lane) on a first-class maiden speech. My only regret is that he is unlikely to have influenced hon. Members opposite to the extent that, with outstanding success, he influenced the erstwhile Labour voters of Cambridge.
Just three years ago, the Labour Party came to power on a wave of high hope and promise for the future. Three years later, the nation now knows that it has failed, and has failed for two simple reasons—bungling incompetence and the pursuit of Socialist policies. Again and again we on these benches warned the Government that they were leading Britain to economic ruin, but they went doggedly on, ignoring the warnings, ignoring the facts, until last weekend, true to their Socialist tradition, they devalued the £.
It is incredible to recall that only three weeks ago—only three weeks ago—the Prime Minister told the House, in a prepared statement:
…there is widespread recognition…that the economy is now on the turn."—[OFFICIAL REPORT, 31st October, 1967; Vol. 753, c. 42.]
Those words were delivered with all the authority of the office of Prime Minister. They were uttered only a week or so before, as we now know, the Chancellor of the Exchequer had decided that devaluation was inevitable. The simple truth is that the House of Commons and the nation were deceived, and the simple consequence of all that has happened is that never again will any words of the right hon. Gentleman be taken at their face value.
But that is not all. One of my hon. Friends pointed out to me this afternoon something of greater significance. On the very day on which the Cabinet took the unanimous decision to devalue, the Prime Minister told the House—that afternoon, a few hours after the decision had been taken by the Cabinet—in answer to one of his own hon. Friends:

My hon. Friend will be aware, of course, that the economy is on the turn and showing strong signs of moving upwards—[Laughter.]
He went on:
This is now being shown… in relation to production…"—[OFFICIAL REPORT, 16th November, 1967; Vol. 754, c. 629.]
Today, we had the speech of the right hon. Gentleman the Prime Minister—

Sir A. V. Harvey: Where is he?

Mr. Barber: —but what he did not tell us this afternoon, in the midst of all the irrelevancies, was that it has been announced that the Index of Industrial Production has fallen yet again, and now is actually lower than it was in January, 1965.
So much for the Prime Minister's boast this afternoon, as he put it, "We set out in 1964 to restructure industry." The Prime Minister wasted a great deal of time talking about the Zinoviev letter, talking about the Post Office scandal, talking about Suez—[HON. MEMBERS: "Hear, hear."] As usual, hon. Members opposite rise to that. This is always predictable. Therefore, I turn to the question of defence. An hour and a quarter ago there appeared on the tape a statement, made outside the House, of course, by the Secretary of State for Defence. I will read to the House one paragraph from that report on the tape:
I do not under-estimate the shock and disappointment for all three Services', said Mr. Healey. 'In many areas our forces will have to operate on narrow margins'.
He went on to say:
 'We would regard the risk involved as unacceptable in normal circumstances'.
Why, instead of all the poppycock we heard from the Prime Minister, did he not tell US that? [HON. MEMBERS: "Where is he?"] I can only say to the Chancellor of the Exchequer that that statement, made by the Secretary of State for Defence —[Interruption.] The right hon. Gentleman may smile, but we are talking about troops, some of whom are operating in very difficult circumstances indeed. I tell the Government Front Bench that that statement represents a
scandal which will shock all those concerned with the safety of our troops. Now shout "Suez". This is what the Government are doing to the British Army.
Almost everything of consequence that the Government have attempted has


ended in failure. They have failed, despite all their protestations, to maintain the exchange rate. They have failed, despite the Prime Minister's solemn assurance at the General Election, to maintain full employment. They have failed to raise production even to the level at which it was in January, 1965. The National Plan, on which the Prime Minister based all his hopes, has been sunk without trace. This afternoon, the Prime Minister had the audacity to tell the House "Our decision is for expansion and full employment". This is the man talking about full employment who has brought this country to such a pitch economically that we now have—

Mr. Manuel: Mr. Manuelrose—

Hon. Members: Sit down.

Mr. Deputy-Speaker (Mr. Sydney Irving): Order.

Mr. Manuel: Would not the right hon. Member agree, if he is taking unemployment as the measuring stick, that his Government reached far higher figures of unemployment, especially in Scotland, than ever this Government have?

Mr. Barber: I am sorry, but the facts are that we have had this year the highest summer unemployment and the highest autumn unemployment since the 1930s. It is also the case—perhaps I may quote this in the Prime Minister's absence—[HON. MEMBERS: "Where is he?"] I am sorry that the Prime Minister is not here, because I should like him to have heard, as I hope hon. Members opposite will hear, what the Prime Minister said at the last election. He told the nation that apart from seasonal increases there should be no rise at all in unemployment.
The tragedy for the people is this: record unemployment of over half a million, the massive increase of £1,300 million in taxation, industrial stagnation. All these burdens which the Government have heaped on the backs of the people have been in vain, because as a result of devaluation the inevitable consequence will be a lowering of the standard of living of the people.
My right hon. Friend the Leader of the Opposition referred quite properly this afternoon, because nothing is more rele-

vant, to the speech of the Chancellor of the Exchequer of 24th July. The Prime Minister refused to reply, but we really are entitled to know whether the Government as a whole, and the Prime Minister, in particular, agree with the Chancellor as to the consequences of devaluation set out by the Chancellor in that speech. It is no good the Prime Minister, with his usual devious nature, trying to squirm out of the question which was put to him by saying that the circumstances on 24th July were different from the circumstances now, because what the Chancellor was saying in that speech quite clearly was, "Whatever the circumstances, these are the consequences of devaluation".
When the Chancellor used those words he was not speaking off the cuff. He was not speaking in answer to a Question. He was making a considered statement. He opened that considered statement with the consequences for our people of devaluation. I will not read again the words read by my right hon. Friend the Leader of the Opposition this afternoon. [HON. MEMBERS: "Do."] Well, perhaps I might just remind the House of one sentence which my right hon. Friend did not quote, because the Chancellor—[Interruption.]
I am pleased that the Prime Minister has come in at this particular moment, because I was about to quote a sentence not quoted by my right hon. Friend this afternoon with which the Chancellor began his remarks and which, I think, can hardly be more apt for the Prime Minister. The Chancellor said:
Let there be no dodging about this.
Then there came the paragraph which goes to the very heart of the matter and in which the Chancellor said this:
The logical purpose of devaluation is a reduction in the standard of life at home."—[OFFICIAL REPORT, 24th July, 1967; Vol. 750, c. 99–100.]
After three years of Socialism, this is now the policy of the Government.

The Prime Minister: While the right hon. Gentleman is on about dodging, would he now give an answer to the question which I put to his Leader this afternoon and to which I have had no answer? Are the Tories—[HON. MEMBERS: "Oh."]

Mr. Deputy Speaker: There is a very limited amount of time left for the debate. I hope that the House will listen.

The Prime Minister: Are the Conservatives in favour of devaluation—"yas" or "No"?

Hon. Member: Answer.

Mr. Barber: The Prime Minister told—

Hon. Member: Answer.

Mr. Barber: I will answer. We are not in favour of devaluation, for this simple reason. The right hon. Gentleman told the House this afternoon that there are two alternatives. He said: either devaluation or deflation and borrowing.

The Prime Minister: Or borrowing.

Mr. Barber: Devaluation, deflation or borrowing. There was an additional alternative which the Prime Minister never mentioned, and it is something which he is incapable of bringing about—that is, the restoration of confidence.
The Prime Minister asked me whether I was in favour of devaluation. I have hold him that we are not in favour of devaluation. Now I should like to put a question to the Prime Minister, and I hope that he will do me the courtesy of answering my question. When the Chancellor of the Exchequer said on 24th July:
The logical purpose of devaluation is a reduction in the standard of life at home."—[OFFICIAL REPORT, 24th July, 1967; Vol. 751, c. 100.]
does the Prime Minister agree?

Hon. Members: Answer.

The Prime Minister: I answered it this afternoon—

Hon. Members: Oh.

Mr. Speaker: Order. I thought that the right hon. Gentleman wanted an answer.

The Prime Minister: I answered it this afternoon and my right hon. Friend the Chancellor of the Exchequer will deal with the right hon. Gentleman again tonight.

Mr. Barber: That confirms the suspicions not only of ourselves but of the whole country, that the right hon. Gentleman is a twister—

Hon. Members: Withdraw.

Mr. Speaker: Order. I hope that hon. Members who have not attended the debate earlier will listen to the final speeches.

Mr. Barber: —because, in fact, that is what every single Member of Parliament will be voting for at 10 o'clock tonight.

Mr. James Griffiths: On a point of order, Mr. Speaker. The right hon. Gentleman was heard to use the word "twister" in reference to my right hon. Friend. Is that in accordance with Parliamentary tradition? Should not the right hon. Gentleman be called upon to withdraw the word?

Mr. Speaker: Order. I did not hear. Will the right hon. Gentleman please repeat what he said?

Mr. James Griffiths: I heard the right hon. Member for Altrincham and Sale (Mr. Barber) use the word "twister" in referring to my right hon. Friend. [HON. MEMBERS: "Hear, hear."] I am asking you to rule whether that is in accordance with Parliamentary tradition, Mr. Speaker.

Mr. Speaker: Order. I would ask the right hon. Gentleman to withdraw that word.

Mr. Barber: Mr. Speaker, of course I always bow to your Ruling—[HON. MEMBERS: "Withdraw."] Of course I withdraw if I am asked to do so by Mr. Speaker, but I must say this to the right hon. Gentleman—[HON. MEMBERS: "Withdraw first."] I have withdrawn. I must say this to the right hon. Gentleman. I think that it is a scandal that he will not stand up at that Box and have the courage to say, yes or no, does he agree that the logical purpose of devaluation is a reduction in the standard of life at home? When the Chancellor of the Exchequer said that this will result in a reduction in the standard of our people, this is the one fact that the right hon. Gentleman deliberately concealed in his broadcast to the nation. That broadcast was a masterly performance of doubletalk, of selective statistics and of the usual evasiveness which we expect from the right hon. Gentleman.
The Chancellor of the Exchequer said in a later passage:
I just do not want either to devalue our own word or to bring down the standard of life of our own people.


Then there appears in HANSARD this observation from a simple-minded and trusting Labour back bencher:
Well done, Jim."—[OFFICIAL REPORT, 24th July, 1967; Vol. 751, c. 102.]
I can assure you, Mr. Speaker, that we on these benches will do everything in our power to make sure that the electorate knows that the hon. Member and every other labour Member of Parliament who supports the Government in the Lobby tonight are deliberately supporting a policy, in the Chancellor's own words,
to bring down the standard of life of our own people.

Mr. William Molloy: rose—

Mr. Barber: I have said this before in the House and I repeat it again. The one thing we can be absolutely sure of is that Socialist back benchers will never sacrifice their seats for their principles.

Mr. Molloy: Mr. Molloyrose—

Mr. Speaker: Order. The right hon. Gentleman obviously is not giving way.

Mr. Barber: The basic trouble throughout these three years has been that the Prime Minister's tactics have been governed by three simple criteria: first and foremost, above everything else, to safeguard his own personal position in the Labour Party regardless of the cost to the country; secondly—and we have seen this again and again and again—to slide over the immediate problems without heed for the long-term consequences for the nation; and, thirdly, to pretend that one can tell one story for home consumption and another for the overseas creditors. We had it even in the midst of the crisis—the most dire crisis which this country has faced since 1949—over the level of unemployment. [Interruption.] I think that the Foreign Secretary wishes to intervene—or is he not feeling very well?

Mr. Molloy: Mr. Molloyrose—

Mr. Speaker: Order.

Mr. Molloy: Mr. Molloyrose—

Mr. Speaker: Order. The hon. Gentleman must contain himself.

Mr. Barber: The Governor of the Bank of England spoke the truth on the

question of unemployment. The Chancellor of the Exchequer had the courage to support him. But then we were subjected to the usual back-tracking of the Prime Minister; and it is this sort of double talk which has led us into this situation.
It is because production has been stagnant for three years that the Chancellor of the Exchequer has found it impossible to reduce the burden of direct taxation. Indeed, he has increased it. Again and again we have urged on the Government policies for altering taxation, policies for private enterprise, policies for the trade unions and policies for recasting the social services. This afternoon, the Prime Minister said that we had put forward no alternative policies to the ones which he had been pursuing. That simply is not true First and foremost, the Government should have based every aspect of their economic policy on the fact that the prosperity of Britain and of her people depends on competitive enterprise. Instead, they have clung to the outworn doctrine of nationalisation and more and more State control.
In July last year, the country was subjected to a package of deflationary gloom the like of which we had not experienced for many years, and yet in the midst of it all, in July—it is incredible, looking back—in the very same month, the Prime Minister arranged for the Second Reading of the steel nationalisation Bill. Now, once again, in the midst of this crisis, he requests his right hon. Friends to bring forward a Measure to nationalise road transport—[HON. MEMBERS: "Hear, hear."] Exactly—and another which will allow the Government to buy their way into private enterprise companies throughout the length and beadth of the land.
It was the Chancellor of the Exchequer who said—and it was a very wise observation—that what matters as far as confidence is concerned is not only the truth, but what people overseas think of us. This is one of the serious troubles which has arisen with this Government, and this is why confidence has gone away from this country. Today, the Prime Minister said that he did not need to listen to his past pronouncements, but in the two or three minutes which are left he is going to listen to just one or two


in relation to what he had to tell the House this afternoon. He told us of the plan which the Labour Government had embarked on, and he added, "All this meant increasing taxation". Then he castigated us for not supporting him.
But it was he who told the electorate that there would be no general increase in taxation. Now we know; now the truth is out. He said that this was the plan the Government started on. The Chancellor of the Exchequer told us that to secure the benefits of devaluation we would need another incomes freeze, but today the Prime Minister told us that a wage freeze was not necessary in present circumstances.
But who is to believe the Prime Minister? This is the man who went on television in March last year and said:
I don't think you can ever legislate for wage increases, and no party is setting out to do that.…. I think this would be monstrously unfair.
He was talking about the freezing of wage claims. Why should anybody believe a word the right hon. Gentleman says?
This afternoon, the Prime Minister told us that he had made clear in his broadcast the extra cost of devaluation. Let me remind him of the words he spoke to the nation. He said:
It"—
he was referring to devaluation—
does not mean, of course, that the £ here in Britain, in your pocket or purse or in your bank, has been devalued.
The right hon. Gentleman is still nodding, but he must be living in a private world of fantasy. Does he not know the prices of bread, butter, fruit, canned food, tea and petrol are going up? He will live—[Interruption.]

Mr. Speaker: Order. Speeches cannot go on against a background of conversation.

Mr. Barber: I will tell the Prime Minister this. He will live to rue the day he ever uttered those words, for over the coming months every man and woman in Britain will come to realise that, once again, they have been deceived.
The Prime Minister told us this afternoon that the only alternative to devaluation—[Interruption.]

Mr. Speaker: Order. We cannot have a background of conversation, even on the Front Bench.

Mr. Barber: I know that right hon. and hon. Gentlemen do not want to hear it, but this is the truth.
At least we now know, in the right hon. Gentleman's own words, when he told us this afternoon that the only alternative—

Mr. Charles Doughty: On a point of order, Mr. Speaker. Will you repeat those remarks? The Foreign Secretary obviously did not hear them.

Mr. Speaker: Order. Mr. Barber—

Mr. Barber: In three short years the Prime Minister and his colleagues have turned a prosperous and confident country into a state of economic depression culminating for the third time in devaluation of the £, as my right hon. Friend pointed out. My goodness! The Prime Minister is, as my right hon. Friend also pointed out, the only Minister in the Cabinet who has done it twice and ought really to know how to do it.
It is a monument to folly and to blindness unequalled since the post-war Labour Government. The same old, stale and corny phrases from the Prime Minister may rally the party faithful, but they will cut no ice with the nation. He may still command the loyalty of his colleagues, as he will tonight, but he has lost the respect of the nation.

Hon. Members: Hear, hear.

Mr. Speaker: Order. The Chair wants to hear the peroration.

Mr. Barber: I can assure you, Mr. Speaker, that if right hon. and hon. Gentlemen had been prepared to listen a little earlier there would have been very much more I wished to say to the House, because the truth is that people marvel at the Prime Minister's sleight of hand—[Interruption.] That is true—but no one any more believes a single word of what he says. Three months after the Prime Minister announced that he was taking personal control of the economy the £ was devalued. That is the true measure of the achievement of the right hon. Gentleman and of this Government.

9.30 p.m.

The Chancellor of the Exchequer (Mr. James Callaghan): I have been asked a number of questions in this debate to which I shall reply. However, I should begin by congratulating the hon. Member for Cambridge (Mr. Lane) on his maiden speech. I regret to say that I was not in the Chamber to hear it but I hope that I shall hear him on many other occasions.
I was asked about the abolition of the export rebate and the selective employment premium. I should like to give answers to those questions now. My right hon. Friend the President of the Board of Trade told the House last evening that the Government intend to abolish the export rebate on 1st April. I know that the hon. Member for Liverpool, Wavertree (Mr. Tilney) is concerned about particular aspects of this matter. It means that it will be paid on exports which qualify for it on or before 31st March. Broadly, they qualify when they are exported or when they are sold to overseas customers, whichever is the later. When in the early months of the new financial year we settle the
outstanding claims which will by that time have been put forward, the scheme will be wound up after that moment.
The selective employment premium will cease as from the week beginning 1st April, 1968. The establishments outside development areas from which it will be removed will continue to be entitled to refund of the tax, and claims for premiums in respect of the weeks before 1st April will be met in the normal way.
In order to do these two things legislation will be required, and the Lord President has intimated to me, and asked me to intimate to the House, that legislation will be brought forward as soon as possible.
I was asked why we should get rid of—

Mr. William Baxter: Mr. William Baxter(West Stirlingshire) rose—

Mr. Callaghan: I have a lot to say. I do not wish to be discourteous to the House, but I should like to get through my speech uninterrupted. That may be a lot to ask, but I shall try not to provoke hon. Members.
A lot of estimates have been made about the effect of devaluation on prices. Of course, it varies a very great deal.
Devaluation itself will affect export prices by about 14·3 per cent., more or less, within limits. The effect of abolishing the rebate and the Selective Employment Premium will be to lessen the effect of the devaluation—I put the word in quotation marks—"bonus" by about 2·8 per cent., bringing it down to a "bonus" of 11·5 per cent.
I was asked why we should get rid of this. The answer is, as I said on Monday, that it is causing increasing irritation among a number of other countries. [Interruption.] It is no use saying "So what?" In all these matters one has to strike where one's best advantage lies, and I believe that it is more important at the moment to stop the wave of protectionism which is sweeping through the world than it is to keep a small rebate of this sort. What we have done will undoubtedly strengthen the American Administration and many others in resisting the protectionism that exists there.
I was asked about the ship builders' relief. I know that it is of interest to some of my hon. Friends as well as to hon. Members opposite. I was asked particularly to reply to the question. The decision on the general export rebates scheme will not apply to the special ship builders' relief from indirect taxes which was introduced in 1966. The relief will continue on ships both for home and for export orders. It would not be right in my view to withdraw this facility so soon after it was introduced and at a very early stage in the reorganisation of the industry.

Mr. W. Baxter: Before the Chancellor—

Mr. Callaghan: I really have a lot to do.
I now come to the point put to me by the Leader of the Liberal Party. He alleged that there had been a leak according to certain—

Mr. Thorpe: I asked whether there had been one.

Mr. Callaghan: The right hon. Gentleman asked whether there had been a leak from Basle about devaluation. The leak, as the right hon. Gentleman himself said, if it were true, occurred before a decision had been taken. What we have to assume about this—and I have discussed the matter with the Governor—is that there


was so much widespread discussion of this matter that, in the words of another Swiss banker, this was conjecture convincingly delivered. The Governor has no doubt at all that there was no leak, because no decision of any description was conveyed in Basle which remotely resembled this point. We have to assume that there was so much talk about it, which had a very adverse impact on the £, that anybody could have made a speculation of this sort at almost any weekend.
I come to the question of the standby and the loans. I want to put this with great care. At the moment there is a lot of politics in international circles about the £, the dollar, the gold market and the international monetary arrangements, and a number of stories are being spread—I will not name their origin, because I have no particular proof—that the I.M.F. standby is not at all sure. Indeed, this has appeared in some Continental newspapers.
A rumour of this sort spread maliciously could have a very serious impact on the international exchanges and I therefore want to say now that I have seen the staff of the International Monetary Fund this morning and they are themselves discussing the matter with Dr. Pierre-Paul Schweitzer. There are regular procedures, as will be known, for going through before a standby credit is established. I want the House to know that on this occasion these procedures are being dealt with much more quickly than on a normal occasion. There is no delay. Indeed, there is an acceleration of procedures, and anyone who spreads any story to the contrary can only have mischief-making and damage to the reserve currencies in his mind. Pierre-Paul Schweitzer, the managing director of the International Monetary Fund, is the best authority on this and I will quote his words. He said:
In the case of the United Kingdom we are fully satisfied that the policy which the United Kingdom Government has already announced is matching all our requirements, so I think it will take only a few days just to finalise all the arrangements but I have no doubt about the outcome.
I hope that on the Continent that will be given prominence equal to that given to some of the rumours which are being spread.
The other part of the standby—and I do not wish to take up many of the points made by the right hon. Member for Altrincham and Sale (Mr. Barber), but is significant when he talks about lack of confidence that in fact 3 billion dollars are being made available in order to sustain the Government—[HON. MEMBERS: "Oh."]—sustain the country—[HON. MEMBERS: "Oh."]—I leave the point; I will keep quiet and pass on.
A large amount of the central banks' standby has already been agreed. A great many of the central banks and other countries have come forward because of their concern to maintain the stability of the international monetary system. It is probably true to say—I would not care to be quoted too closely —that certainly 1 billion or 1½ billion dollars are available, plus 1·4 billion dollars from the International Monetary Fund. These two represent a standby, not a loan, for us to use to repel speculation, of something like 3 billion dollars, which is a very substantial amount.
I now come to the argument which has been raised many times by those who say that they are expert in these matters and in the ways of the City of London —that we should have devalued suddenly on Friday, that we should suddenly have gone to the market and said that the rate was now 2·40. I have no time to argue this matter this evening. I have no doubt that hon. Members will want to do so. If they wish to pit their authority against that of others, I can only tell them that I have discussed this matter with the Governor of the Bank of England again this evening—of course we have discussed it on a number of occasions—and in his view for us to have changed the rate while the markets were open on Friday would have been a disaster. [HON. MEMBERS: "Why?"]
As regards declaring a different rate on Thursday night, we would have done it then in circumstances where we would not have notified the International Monetary Fund, where we would have broken all the rules of the International Monetary Fund and all the agreements which exist. We would not have consulted the sterling area countries. We would not have been able to notify either the E.F.T.A. countries, the Common


Market countries or the United States of America and secured their agreement.
Hon. Gentlemen opposite really should try and restrain their enthusiasm about this matter. I promise them that there are people who are just as expert as they are in handling these issues, and, although it may be convenient to blame the Government, this operation was handled, in my judgment and that of those who know about it, with great technical brilliance. When I hear some people come forward and talk about the situation, the Bank of England handles more sterling in a day than some of their banks handle in a year.
But, still, the net result is what matters. Other countries have not followed us. Other countries have accepted what we have done. They have acquiesced in it. They have said that they believe it to be the right thing to do in the circumstances. We have saved far more for the country by the method in which it was done than had we indulged in a panic-stricken devaluation on the basis of a short-term movement in the market which is now being rapidly reversed, I am glad to say.
I now pass to the next point raised by the right hon. Member for Enfield, West (Mr. Iain Macleod) in relation to public expenditure. He asked me whether the cuts that I was announcing are additional to those announced on 24th July.
Let me put it this way. I think that this is the point about which he was concerned. The new reductions are wholly additional to the results of the expenditure review which I referred to in my speech on 24th July. But, as I said, they relate mainly to expenditure in 1968–69, while the review which we carried out in the summer was, as I made clear in my speech on 24th July, directed not to 1968–69 but to later years, especially to 1970–71. I will return to the point later, but I hope that that deals with the right hon. Gentleman's question for the moment.
Now I come to exports, because, time and time again in the debate, the point has been made that exporters have a major new incentive. Bearing in mind the cost position, it will be for the individual exporter to decide whether he will get the most advantage from cutting his price in foreign exchange and increasing the volume of his sales, or whether the

greater advantage will come to him from improving his profit margins. The only advice that I would give tonight is to tell every exporter to do everything that he can to get the biggest increase in earnings, both for himself and for the country.
It is obvious from the Press reports that I have read—and they are still coming in—that a great deal of thinking and deciding is going on. Eighty per cent. or more of our exports go to countries which, because of the way it was handled among other reasons, have not devalued. They include all the major industrial countries. In all these markets the United Kingdom exporter has a major advantage, not only over other exporting countries but over domestic manufacturers. On present prices, well over £4,000 million of exports stand to benefit in a massive way, and we have a new advantage against our competitors exporting to countries which decided to devalue with us. So there are substantial benefits to be got out of this set-back.
What does the devaluation set out to do? First of all, it will make a turn-round in the balance of payments of some £500 million through the measures which have been adopted and announced—hire purchase and credit, nationalised industries cuts, public expenditure cuts, defence cuts and the others referred to. There is a need to shift resources in these spheres of activity.
Have we done enough? The Opposition, I think, are a little split-minded about this; in some ways we should do more and in others less. As this is to be an operation which shifts resources from one field to another, from private and public consumption into exports, and as that is a process that must engage over the next six to 18 months, I believe that we have done enough for the time being.
I have seen and watched over the last 20 years the inexorable increase of public expenditure which never seems to be restrained because, even when we make cuts, other new ideas come forward, and when I see the inexorable rise in private consumption I do not wish to disguise from the House that if we are to get the full benefit of the £500 million turn round on the balance of payments, the Government may well have to take further steps in due course, as the export drive


gets going and as growth in this country reaches substantial levels, to ensure that the balance of payments figure is kept and maintained.
I cannot be any more specific than that, because such a short while after devaluation no one can measure the impact. However, it is right that the country and the House of Commons should know that that possibility is certainly not out the Government's mind.

Mr. Barber: The Prime Minister said that the priority programmes of housing, school building and hospital building would be safeguarded. As we understand that, as a result of devaluation, the cost of building will go up, will there be additional funds available on top of those already planned?

Mr. Callaghan: This problem will have to be looked at. I am not in a position to give an answer tonight.
There is no doubt that there will be a growing effect on some prices. I do not think that anyone can escape the consequence of that. This will have a serious effect on the problems of the trade union leaders and all trade unionists generally. After a period of wage freeze, followed by restraint, we are now saying to them that it is not possible, if we are to get this shift in resources, for wage increases to be conceded except on a productivity basis or in the case of the lowest paid workers during the next 12 months. I was grateful to see the statement made by the Trades Union Congress this morning on this matter, and discussions with them are continuing.
My right hon. Friend the Prime Minister said quite clearly this afternoon—and this is borne out by all the estimates we can make—that there is little doubt that unemployment, after perhaps a short rise immediately because of the hire-purchase restrictions, will fall away very substantially during the next 12 months, not merely because we move into the spring and summer, but also on a seasonally corrected basis, and we shall have a much lower level of unemployment next winter than at the present time.
I have been asked about my reasons for recommending devaluation. I have given a number of them. I came to the conclusion that it would be irresponsible

to go on borrowing short-term money when the balance of payments situation did not look as though it was likely to improve within a measureable distance of time. If we had not had in the years behind us a continuing balance of payments deficit, it might have been possible to have ridden this out. But there comes a moment when one has to say halt, and I think that we have reached that moment this autumn.
What would have stopped it? One thing is quite clear. One can argue whether monthly trade figures should be a barometer, but the fact is that they are. If those monthly trade figures had shown a different plus every month instead of a minus, I have no doubt that we should not have devalued today. But it was the continuation of the minus in those monthly trade figures, closely watched and scrutinized—we can argue about the effect of invisibles and all the rest of it —which eventually sapped confidence in the competitive position of this country.
I also had to consider, perhaps rather longer—[Interruption.] The Government do not export; industry exports. I am not seeking to ascribe any responsibility to anybody for failing to try to export. I am merely pointing out the fact that it is industry which does the exporting, and industry which imports, and if the two do not balance, eventually we get into a disequilibrium. As I was saying, I had to consider, perhaps rather longer than some of the academic writers, the consequence of devaluation on international repercussions. We have escaped these international repercussions, in some ways by the skin of our teeth. I think that, despite the ripples that still exist, the situation will settle down.
I hope that it will, and we must all work to make it settle down because of the consequence to the rest of the world, but I believe that the way in which this was handled, the rate which was chosen, and the time that was taken enabled us to escape consequences. This has been of great value both to this country and to the rest of the world.
I do not think, although I have heard no reply to the Prime Minister's question, that there is any serious challenge to the decision to devalue. Neither the Leader of the Opposition nor the right hon. Member for Enfield, West seemed


to quarrel with that. They quarrelled with everything else, but as far as I can understand it they accept that it was necessary to devalue.
The second point on which I think there has been more agreement in the last couple of days than there would have been a year or two ago is that devaluation is no substitute for greater efficiency or higher productivity. I think that there is general agreement that all it does is to take the pressure off the exchange rate for the time being. We have got ourselves a breathing space, that is all. It is a long breathing space now. It is a breathing space which we can sustain although clearly the length of time that it lasts will depend on the degree of competitiveness and productivity of British industry.
This is the old argument. It is almost a wearying economic argument now. We go through the regular motions of it time after time—productivity, prices and incomes, getting the exports going on, and so on. I think that hon. Members must be as tired of listening to it as I am of talking about it. There are no new truths in this field. Everything that I said on 24th July is true, and it cannot be escaped. All these things are so, and they are not altered, but I do not think that we get anywhere—and this is why I refrain from exhortation as I was asked to do—by hectoring, or lecturing, or moralising, either to the workman on the bench, who is not listening anyway, or to the man who reads the Financial Times who regards all this as a lot of political claptrap. There is no moralising about this, but nor do I like the cheap cynicism that extends to almost every line and vein of our country at the present time.
I believe that that has had a very great and serious effect on the standing with which our Parliamentary and other institutions are held, and this I believe—[Interruption.]—I ask the House to hear me out on this. There is a growing view, and one that is fostered in some quarters, that democracy cannot solve our problems. I regard as potentially sinister this new big business organisation which has been set up, with some rather dubious people heading it, who are claiming that it is impossible for this House of Commons and for the country to solve the economic problems with which we are

confronted. It is true, and this is something—[Interruption.]—the one headed by Sir Paul Chambers is the one to which I am referring. They may well be the biggest exporters in the world, and they may still have a contempt for democracy.
The dilemma that I think this country is faced with, and with which the House of Commons on both sides is faced with, is that people will punish their leaders and punish their Governments if they cannot have both a perpetually rising standard of living and full employment and all the good things they need even though they are not earned. We have seen the results of this in a number of elections and by-elections in many parts of the world and in many parts of the country.
The real question is this: we are going back now to a period of full employment and expansion in the economy and there is no doubt that, over the next year or two, there will be a rise in the real value of wages even though it is postponed for the next 12 months. Are we going to be able to hold ourselves in check when we have reached that position in order to ensure that we can maintain the momentum of growth?
Unlike some hon. Members, I do not take an easy view that adjusting the exchange rate is a pure matter of technical adjustment. On the other hand, I do not think that it is a moral issue either. One clearly cannot say one holds to an exchange rate irrespective of all the consequences to exports, to employment and the rest. But a change in the exchange rate—and this is something the whole country and the House must recognise and acknowledge—is a symbol that this country has slipped behind other nations, that our standard of life, if not our quality of life, is dropping behind by comparison with them. Unless it is viewed in that light, then it cannot be seen as the set-back which the country as a whole has sustained and for which the Government, like everyone else, but only like everyone else, must accept their share of the responsibility.
I want to see in this country the sense of self-discipline survive and grow which will enable us to combine those good things in life which the whole country wants. I want to see social democracy work and succeed, and I think that it can. But if it is to do so—although this may


seem far removed from devaluation—we have to look beyond the economic motivation and much deeper than the economic motivation.
What we need is a country which is concerned not only with economic motivation but a nation that is both proud and self-reliant and compassionate. The British people have the qualities to achieve this. What we need and what I think we have been lacking is the self-confidence to take advantage of the changes hat are ahead of us.

I believe that, if we make a united effort—every one of us, for everyone is needed for this purpose—then this country can recover from the slippage which has taken place in her standard of life and the way she has adjusted herself to the problems of the post-war years. If she does that, I have no doubt that we shall succeed. This Government can succeed and when I look across the Floor I recognise that there is no one there who can.

Question put:—

The House Divided: Ayes, 335, Noes, 258.

Division No. 6.]
AYES
[10.0 p.m.


Abse, Leo
Darling, Rt. Hn. George
Gunter, Rt. Hn. R. J.


Albu, Austen
Davidson, Arthur (Accrington)
Hale, Leslie (Oldham, W.)


Allaun, Frank (Salford, E.)
Davies, Dr. Ernest (Stretford)
Hamilton, James (Bothwell)


Alldritt, Walter
Davies, G. Elfed (Rhondda, E.)
Hamilton, William (Fife, W.)


Allen, Scholefield
Davies, Ednyfed Hudson (Conway)
Hamling, William


Anderson, Donald
Davies, Harold (Leek)
Hannan, William


Archer, Peter
Davies, Ifor (Gower)
Harper, Joseph


Armstrong, Ernest
Delargy, Hugh
Harrison, Walter (Wakefield)


Ashley, Jack
Dell, Edmund
Hart, Mrs. Judith


Atkins, Ronald (Preston, N.)
Dempsey, James
Haseldine, Norman


Atkinson, Norman (Tottenham)
Dewar, Donald
Hattersley, Roy


Bacon, Rt. Hn. Alice
Diamond, Rt. Hn. John
Hazell, Bert


Bagier, Gordon A. T.
Dickens, James
Healey, Rt. Hn. Denis


Barnes, Michael
Dobson, Ray
Heffer, Eric S.


Barnett, Joel
Doig, Peter
Henig, Stanley


Baxter, William
Donnelly, Desmond
Herbison, Rt. Hn. Margaret


Beaney, Alan
Driberg, Tom
Hilton, W. S.


Bellenger, Rt. Hn. F. J.
Dunn, James A.
Hobden, Dennis (Brighton, K'town)


Bence, Cyril
Dunnett, Jack
Hooley, Frank


Benn, Rt. Hn. Anthony Wedgwood
Dunwoody, Mrs. Gwyneth, (Exeter)
Horner, John


Bennett, James (G'gow, Bridgeton)
Dunwoody, Dr. John (F'fh &amp; C'b'e)
Houghton, Rt. Hn. Douglas


Bidwell, Sydney
Eadie, Alex
Howarth, Harry (Wellingborough)


Binns, John
Edelman, Maurice
Howarth, Robert (Bolton, E.)


Bishop, E. S.
Edwards, Rt. Hn. Ness (Caerphilly)
Howell, Denis (Small Heath)


Blackburn, F.
Edwards, Robert (Bilston)
Howie, W.


Blenkinsop, Arthur
Edwards, William (Merioneth)
Hoy, James


Boardman, H.
Ellis, John
Huckfield, Leslie


Booth, Albert
English, Michael
Hughes, Rt. Hn. Cledwyn (Anglesey)


Boston, Terence
Ennals, David
Hughes, Emrys (Ayrshire, S.)


Bottomley, Rt. Hn. Arthur
Ensor, David
Hughes, Hector (Aberdeen, N.)


Boyden, James
Evans, Albert (Islington, S.W.)
Hughes, Roy (Newport)


Braddock, Mrs. E. M.
Evans, loan L. (Birm'h'm, Yardley)
Hunter, Adam


Bradley, Tom
Faulds, Andrew
Irvine, A. J. (Edge Hill)


Bray, Dr. Jeremy
Fernyhough, E.
Jackson, Colin (B'h'se &amp; Spenb'gh)


Broughton, Dr. A. D. D.
Finch, Harold
Jackson, Peter M. (High Peak)


Brown, Bob (N'c'tle-upon-Tyne, W.)
Fitch, Alan (Wigan)
Janner, Sir Barnett


Brown, Rt. Hn. George (Belper)
Fitt, Gerard (Belfast, W.)
Jay, Rt. Hn. Douglas


Brown, Hugh D. (G'gow, Provan)
Fletcher, Raymond (Ilkeston)
Jeger, George (Goole)


Brown, R. W. (Shoreditch &amp; F'bury)
Fletcher, Ted (Darlington)
Jeger, Mrs. Lena (H'b'n&amp;St.P'cras, S.)


Buchan, Norman

Jenkins, Hugh (Putney)


Buchanan, Richard (G'gow, Sp'burn)
Foley, Maurice
Jenkins, Rt. Hn. Roy (Stechford)


Butler, Herbert (Hackney, C.)
Foot, Sir Dingle (Ipswich)
Johnson, Carol (Lewisham, S.)


Butler, Mrs. Joyce (Wood Green)
Foot, Michael (Ebbw vale)
Johnson, James (K'ston-on-Hull, W.)


Callaghan, Rt. Hn. James
Ford, Ben
Jones, Dan (Burnley)


Cant, R. B.
Forrester, John
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)


Carmichael, Neil
Fowler, Gerry
Jones, J. Idwal (Wrexham)


Carter-Jones, Lewis
Fraser, John (Norwood)
Jones, T. Alec (Rhondda, west)


Castle, Rt. Hn. Barbara
Freeson, Reginald
Judd, Frank


Chapman, Donald
Galpern, Sir Myer
Kelley, Richard


Coe, Denis
Gardner, Tony
Kenyon, Clifford


Coleman, Donald
Garrett, W. E.
Kerr, Dr. David (W'worth, Central)


Concannon, J. D.
Ginsburg, David
Kerr, Russell (Feltham)


Conlan, Bernard
Gordon Walker, Rt. Hn. P. C.
Lawson, George


Corbet, Mrs. Freda
Gourlay, Harry
Leadbitter, Ted


Craddock, George (Bradford, S.)
Gray, Dr. Hugh (Yarmouth)
Ledger, Ron


Cronin, John
Greenwood, Rt. Hn. Anthony
Lee, Rt. Hn. Frederick (Newton)


Crosland, Rt. Hn. Anthony
Gregory, Arnold
Lee, Rt. Hn. Jennie (Cannock)


Crossman, Rt. Hn. Richard
Griffiths, David (Rother Valley)
Lee, John (Reading)


Cullen, Mrs. Alice
Griffiths, Rt. Hn. James (Llanelly)
Lestor, Miss Joan


Dalyell, Tam
Griffiths, Will (Exchange)
Lever, Harold (Cheetham)




Lever, L. M. (Ardwick)
Ogden, Eric
Silkin, Hn. S. C. (Dulwich)


Lewis, Ron (Carlisle)
Oram, Albert E.
Silverman, Julius (Aston)


Lipton, Marcus
Orbach, Maurice
Silverman, Sydney (Nelson)


Lomas, Kenneth
Orme, Stanley
Skeffington, Arthur


Loughlin, Charles
Oswald, Thomas
Slater, Joseph


Lyon, Alexander W. (York)
Owen, Dr. David (Plymouth, S'tn)
Small, William


Lyons, Edward (Bradford, E.)
Owen, Will (Morpeth)
Snow, Julian


Mabon, Dr. J. Dickson
Padley, Walter
Spriggs, Leslie


McBride, Neil
Page, Derek (King's Lynn)
Steele, Thomas (Dunbartonshire, W.)


MacColl, James
Paget, R. T.
Stewart, Rt. Hn. Michael


MacDermot, Niall
Palmer, Arthur
Stonehouse, John


Macdonald, A. H.
Pannell, Rt. Hn. Charles
Strauss, Rt. Hn, G. R.


McGuire, Michael
Park, Trevor
Summerskill, Hn. Dr. Shirley


McKay, Mrs. Margaret
Parker, John (Dagenham)
Swain, Thomas


Mackenzie, Gregor (Rutherglen)
Parkin, Ben (Paddington, N.)
Taverne, Dick


Mackie, John
Parkyn, Brian (Bedford)
Thomson, Rt. Hn. George


Mackintosh, John P.
Pavitt, Laurence
Thornton, Ernest


Maclennan, Robert
Pearson, Arthur (Pontypridd)
Tinn, James


McMillan, Tom (Glasgow, c.)
Peart, Rt. Hn. Fred
Tomney, Frank


McNamara, J. Kevin
Pentland, Norman
Tuck, Raphael


MacPherson, Malcolm
Perry, Ernest G. (Battersea, S.)
Urwin, T. W.


Mahon, Peter (Preston, S.)
Perry, George H. (Nottingham, S.)
Varley, Eric G.


Mahon, Simon (Bootle)
Prentice, Rt. Hn. R. E.
Wainwright, Edwin (Dearne Valley)


Mallalieu, E. L. (Brigg)
Price, Christopher (Perry Barr)
Walden, Brian (All Saints)


Mallalieu, J. P. W. (Huddersfield, E.)
Price, Thomas (Westhoughton)
Walker, Harold (Doncaster)


Manuel, Archie
Price, William (Rugby)
Wallace, George


Mapp, Charles
Probert, Arthur
Watkins, David (Consett)


Marks, Kenneth
Pursey, Cmdr. Harry
Watkins, Tudor (Brecon &amp; Radnor)


Marquand, David
Randall, Harry
Weitzman, David


Marsh, Rt. Hn. Richard
Rankin, John
Wellbeloved, James


Mason, Roy
Rees, Merlyn
Wells, William (Walsall, N.)


Maxwell, Robert
Reynolds, G. W.
Whitaker, Ben


Mayhew, Christopher
Rhodes, Geoffrey
White, Mrs. Eirene


Mellish, Robert
Richard, Ivor
Whitlock, William


Mendelson, J. J.
Roberts, Albert (Normanton)
Wilkins, W. A.


Mikardo, Ian
Roberts, Goronwy (Caernarvon)
Willey, Rt. Hn. Frederick


Millan, Bruce
Roberts, Gwilym (Bedfordshire, S.)
Williams, Alan (Swansea, W.)


Miller, Dr. M. S.
Robertson, John (Paisley)
Williams, Alan Lee (Hornchurch)


Milne, Edward (Blyth)
Robinson, W. O. J. (Walth'stow, E.)
Williams, Clifford (Abertillery)


Mitchell, R. C. (S'th'pton, Test)
Rodgers, William (Stockton)
Williams, Mrs. Shirley (Hitchin)


Molloy, William
Roebuck, Roy
Williams, W. T. (Warrington)


Moonman, Eric
Rogers, George (Kensington, N.)
Willis, George (Edinburgh, E.)


Morgan, Elystan (Cardiganshire)
Rose, Paul
Wilson, Rt. Hn. Harold (Huyton)


Morris, Alfred (Wythenshawe)
Ross, Rt. Hn. William
Wilson, William (Coventry, S.)


Morris, Charles R. (Openshaw)
Rowlands, E. (Cardiff, N.)
Winnick, David


Morris, John (Aberavon)
Ryan, John
woodburn, Rt. Hn. A.


Moyle, Roland
Shaw, Arnold (Ilford, S.)
Woof, Robert


Mulley, Rt. Hn. Frederick
Sheldon, Robert
Wyatt, Woodrow


Murray, Albert
Shinwell, Rt. Hn. E.
Yates, Victor


Neal, Harold




Newens, Stan
shore, peter(Stepney)



Noel-Baker, Francis (Swindon)
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
TELLERS FOR THE AYES:


Norwood, Christopher
Short, Mrs. Renée (W'hampton, N.E.)
Mr. Charles Grey and


Oakes, Gordon
Silkin, Rt. Hn. John (Deptford)
Mr. Brian O'Malley.




NOES


Alison, Michael (Barkston Ash)
Brown, Sir Edward (Bath)
d'Avigdor-Goldsmid, Sir Henry


Allason, James (Hemel Hempstead)
Bruce-Gardyne, J.
Dean, Paul (Somerset, N.)


Astor, John
Bryan, Paul
Deedes, Rt. Hn. W. F. (Ashford)


Atkins, Humphrey (M't'n &amp; M'd'n)
Buchanan-Smith, Alick (Angus, N&amp;M)
Digby, Simon Wingfield


Awdry, Daniel
Buck, Antony (Colchester)
Dodds-Parker, Douglas


Baker, W. H. K.
Bullus, Sir Eric
Doughty, Charles


Balniel, Lord
Burden, F. A.
Douglas-Home, Rt. Hn. Sir Alec


Barber, Rt. Hn. Anthony
Campbell, Gordon
Drayson, G. B.


Batsford, Brian
Carlisle, Mark
du Cann, Rt. Hn. Edward


Beamish, Col. Sir Tufton
Carr, Rt. Hn. Robert
Eden, Sir John


Bell, Ronald
Cary, Sir Robert
Elliot, Capt. Walter (Carshalton)


Bennett, Sir Frederic (Torquay)
Chichester-Clark, R.
Emery, Peter


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Clark, Henry
Errington, Sir Eric


Berry, Hn. Anthony
Clegg, Walter
Eyre, Reginald


Biffen, John
Cooke, Robert
Farr, John


Biggs-Davison, John
Cooper-Key, Sir Neill
Fisher, Nigel


Birch, Rt. Hn. Nigel
Cordle, John
Fletcher-Cooke, Charles


Black, Sir Cyril
Corfield, F. V.
Fortescue, Tim


Blaker, Peter
Costain, A. P.
Foster, Sir John


Boardman, Thomas (Leicester, S.W.)
Craddock, Sir Beresford (Spelthorne)
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)


Body, Richard
Crosthwaite-Eyre, Sir Oliver
Galbraith, Hon. T. G.


Bossom, Sir Clive
Crouch, David
Gibson-Watt, David


Boyd-Carpenter, Rt. Hn. John
Crowder, F. P.
Giles, Rear-Adm. Morgan


Boyle, Rt. Hn. Sir Edward
Cunningham, Sir Knox
Gilmour, Ian (Norfolk, C.)


Braine, Bernard
Currie, G. B. H.
Gilmour, Sir John (Fife, E.)


Brewis, John
Dalkeith, Earl of
Glover, Sir Douglas


Brinton, Sir Tatton
Dance, James
Glyn, Sir Richard


Bromley-Davenport, Lt. -Col. Sir Walter
Davidson, James (Aberdeenshire, W.)
Godber, Rt. Hn. J. B,







Goodhart, Philip
Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)
Rees-Davies, W. R.


Goodhew, Victor
Lloyd, Ian (P'tsm'th, Langstone)
Renton, Rt. Hn. Sir David


Gower, Raymond
Lloyd, Rt. Hn. Selwyn (Wirral)
Ridley, Hn. Nicholas


Grant, Anthony
Longden, Gilbert
Ridsdale, Julian


Grant-Ferris, R.
Loveys, W. H.
Rippon, Rt. Hn. Geoffrey


Gresham Cooke, R.
Lubbock, Eric
Robson Brown, Sir William


Grieve, Percy
McAdden, Sir Stephen
Rodgers, Sir John (Sevenoaks)


Griffiths, Eldon (Bury St. Edmunds)
MacArthur, Ian
Rossi, Hugh (Hornsey)


Gurden, Harold
Mackenzie, Alasdair (Ross&amp;Crom'ty)
Royle, Anthony


Hall, John (Wycombe)
Maclean, Sir Fitzroy
Russell, Sir Ronald


Hall-Davit, A. G. F.
Macleod, Rt. Hn. Iain
St. John-Stevas, Norman


Hamilton, Marquess of (Fermanagh)
McMaster, Stanley
Sandys, Rt. Hn. D.


Hamilton, Michael (Salisbury)
Macmillan, Maurice (Farnham)
Scott, Nicholas


Harris, Frederic (Croydon, N.W.)
Maddan, Martin
Sharples, Richard


Harris, Reader (Heston)
Maginnis, John E.
Shaw, Michael (Sc'b'gh &amp; Whitby)


Harrison, Brian (Maldon)
Marples, Rt. Hn. Ernest
Silvester, Frederick


Harrison, Col. Sir Harwood (Eye)
Marten, Neil
Sinclair, Sir George


Harvey, Sir Arthur Vere
Maude, Angus
Smith, John


Harvie Anderson, Miss
Maudling, Rt. Hn. Reginald
Stainton, Keith


Hastings, Stephen
Mawby, Ray
Steel, David (Roxburgh)


Hawkins, Paul
Maxwell-Hyslop, R. J.
Stodart, Anthony


Hay, John
Maydon, Lt. -Cmdr. S. L. C.
Stoddart-Scott, Col. Sir M. (Ripon)


Heald, Rt. Hn. Sir Lionel
Mills, Peter (Torrington)
Summers, Sir Spencer


Heath, Rt. Hn. Edward
Mills, Stratton (Belfast, N.)
Tapsell, Peter


Heseltine, Michael
Miscampbell, Norman
Taylor, Sir Charles (Eastbourne)


Higgine, Terence L.
Mitchell, David (Basingstoke)
Taylor, Edward M. (G'gow, Cathcart)


Hiley, Joseph
Monro, Hector
Taylor, Frank (Moss Side)


Hill, J. E. B.
Montgomery, Fergus
Teeling, Sir William


Hobson, Rt. Hn. Sir John
Morgan, Geraint (Denbigh)
Temple, John M.


Hogg, Rt. Hn. Quintin
Morrison, Charles (Devizes)
Thatcher, Mrs. Margaret


Holland, Philip
Mott-Radclyffe, Sir Charles
Thorpe, Rt. Hn. Jeremy


Hooson, Emlyn
Munro-Lucas-Tooth, Sir Hugh
Tilney, John


Hordern, peter
Murton, Oscar
Turton, Rt. Hn. R. H.


Hornby, Richard
Nabarro, Sir Gerald
van Straubenzee, W. R.


Howell, David (Guildford)
Neave, Airey
Vaughan-Morgan, Rt. Hn. Sir John


Hunt, John
Nicholls, Sir Harmar
Vickers, Dame Joan


Hutchison, Michael Clark
Noble, Rt. Hn. Michael
Wainwright, Richard (Colne Valley)


Iremonger, T. L.
Nott, John
Walker, Peter (Worcester)


Irvine, Bryant Godman (Rye)
Onslow, Cranley
Walker-Smith, Rt. Hn. Sir Derek


Jenkin, Patrick (Woodford)
Orr, Capt. L. P. S.
Wall, Patrick


Jennings, J. C. (Burton)
Orr-Ewing, Sir Ian
Walters, Dennis


Johnson Smith, G. (E. Grinstead)
Osborn, John (Hallam)
Ward, Dame Irene


Johnston, Russell (Inverness)
Osborne, Sir Cyril (Louth)
Weatherill, Bernard


Jones, Arthur (Northants, S.)
Page, Graham (Crosby)
Webster, David


Jopling, Michael
Page, John (Harrow, W.)
Wells, John (Maidstone)


Joseph, Rt. Hn. Sir Keith
Pardoe, John
Whitelaw, Rt. Hn. William


Kaberry, Sir Donald
Pearson, Sir Frank (Clitheroe)
Wills, Sir Gerald (Bridgwater)


Kershaw, Anthony
Peel, John
Wilson, Geoffrey (Truro)


Kimball, Marcus
Percival, Ian
Winstanley, Dr. M. P.


King, Evelyn (Dorset, S.)
Peyton, John
Wolrige-Gordon, Patrick


Kirk, peter
Pike, Miss Mervyn
Wood, Rt. Hn. Richard


Kitson, Timothy
Pink, R. Bonner
Woodnutt, Mark


Knight, Mrs. Jill
Pounder, Rafton
Worsley, Marcus


Lambton, Viscount
Price, David (Eastleigh)
Wright, Esmond


Lancaster, Col. C. G.
Prior, J. M. L.
Wylie, N. R.


Lane, David
Pym, Francis
Younger, Hn. George


Langford-Holt, Sir John
Quennell, Miss J. M.



Legge-Bourke, Sir Harry
Ramsden, Rt. Hn. James
TELLERS FOR THE NOES:


Lewis, Kenneth (Rutland)
Rawlinson, Rt. Hn. Sir Peter
Mr. R. W. Elliott and




Mr. Jasper More.

Resolved,

That this House approves the Statement of 20th November by the Chancellor of the Exchequer on the measures in relation to the economic situation.

Orders of the Day — DISABLED DRIVERS (VEHICLES)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Armstrong.]

10.15 p.m.

Mr. Neil Marten: Mr. Neil Marten(Banbury) rose—

Mr. Speaker: Order. Will hon. Members leave the Chamber quietly. An hon. Member has the Adjournment and they may themselves have an Adjournment debate one day.

Mr. Marten: Now that we can move from the rather rougher waters of our two-day debate into the calmer waters of what I think is not a party political matter, the provision of vehicles for the disabled, may I say how grateful I am to be allowed to have this debate so soon after I asked for it.
Three years ago almost to this week, the then hon. Member for Oxford City, Mr. Montague Woodhouse, had a debate on precisely the same subject. I hope that the answers which the Minister gives me tonight will not be the same as we had three years ago. Curiously enough, that debate took place after the crisis Budget of 1964, but then it took place at 4·15 in the morning, whereas tonight we are somewhat earlier.
I have been interested in this subject of vehicles for the disabled for some years. Any hon. Member who came across it in his constituency life would take a similar interest. I feel particularly privileged that I have been able to take this interest in disabled drivers and to speak up for them tonight. There is no magic in the fact that hon. Members from North Oxfordshire should raise the question in this House, because Oxford has wonderful hospitals, such as the Nuffield and the Radcliffe, which attract disabled people. They come there to be near to the hospitals where they can get treatment. That is why we come into contact with these cases.
I am raising this matter at this particular time because I have been working on it for a number of years. About four Saturdays ago, at my "surgery"

in Woodstock, I came across a constituent, Mr. George Johnson, who had been a haemophilic all his life and spent most of his young life in hospital and I heard the tragic story of how that had affected him. By sheer determination, that man has now got a job with the British Motor Corporation and is doing extremely well.
I give one example to give the setting to my remarks. It is the one I mentioned at Question Time the other day to the Minister of this man who, in 1966, being a haemophilic—which is internal bleeding when he gets a bump—had 39 bleedings in the year. Each time he had to go to hospital, perhaps for a weekend or for a night, and have blood plasma transferred into him at the cost—I do not drag the question of cost into it too much—of £30 each time, so the cost to the National Health Service was about £1,170. All those bumps, I understand, came from the invalid tricycle which he was given to ride. That is an awful life for any man to lead with the frequent nights spent in hospital. It is bad enough being a haemophilic, but it is not necessary to add to his difficulties by giving him a vehicle which is unsuitable.
Having heard about this case, I arranged to try out invalid tricycles myself. About two Saturdays ago I tried out four different types and drove them myself. I now realise that I made a mistake in not doing this years ago. I am sorry that I did not do so. Only on trying out these vehicles does one realise how difficult and, in many ways, unsuitable they are. I will not go into the details of their unsuitability. I have written to the Minister giving him details. To give only one example, they have a tiller instead of a steering wheel. On the tiller are the accelerator and the clutch. It must be moved backwards and forwards to steer left and right and upwards and downwards to brake. Thus there are four movements to carry out with one hand. It is extremely complicated. When it went over a bump at a reasonable speed, it changed direction. It was the most difficult vehicle I have ever had to drive.
Doubtless people get used to it. However, it is not good enough. I am horrified at the thought of an invalid, perhaps a cripple, driving such a vehicle along a


country road on a windy and wet night, especially if it broke down, as these vehicles fairly frequently do. I came away from that test angry that these gallant people, who in all conscience suffer enough in life, should have this additional hazard when it need not be so.
I do not want to make a long speech, because I believe one or two other hon. Members wish to intervene. In the short time available to me, I want to make some quick suggestions. I understand that legislation is about to be introduced to enable the Minister to extend the categories of people who are entitled to four-wheelers. I contend that the categories entitled to four-wheelers should be extended, or else we should go in for a really good three-wheel car which can take passengers. I want the Parliamentary Secretary himself to do what I did and try these vehicles out—all varieties and not a spanking new one such as the Ministry might produce for him.
I want the right hon. Gentleman to try out one which has been in use for a couple of years. I know that he is about 6 feet 7 inches tall, and would have difficulty in getting into such a vehicle. However, I am sure that if he tried out such a vehicle it would make all the difference to his approach when it comes to deciding who should have four-wheeled vehicles. Having tried out a vehicle, I hope that as a result he would persuade his right hon. Friend the Minister to do the same. Then he, too, would be angry and would be far better able to decide who to give these cars to.
On reading through the debates and the Answers to Questions I find an extraordinary similarity in the answers which have been given over the years. I am not criticising the Ministry, but I suggest that the Minister, when he has got his legislation, and has to make this decision as to the wider distribution of vehicles, should take plenty of outside evidence as well as the evidence of his doctors in the Ministry. This is a non-party matter. That is one of the pleasant parts about it. I am sure that some hon. Members here tonight would willingly unite and form an all-party group to help the Minister, in the House or anywhere else, in coming to the right conclusion.
I ask the Parliamentary Secretary also to examine the economics of these cars —the price differential between a four-wheeler, a three-wheeler as we have it now, and a sensible three-wheel car. I ask him also to examine the difference in the maintenance costs of these cars, because I believe that the maintenance costs of a four-wheel minicar would be much less than the maintenance costs of the present three-wheel tricycle. We should redefine, as I believe the Minister will do, the qualifications of people entitled to four-wheelers. This is my only criticism of the Ministry.
I say "the Ministry" because the Conservative Government took the same attitude. It came out in the statement of the Minister of Health on 15th February, when he said this:
Very large sums would be involved if it were decided to provide a car for all those now eligible for a tricycle. This is not so much because a car is rather more expensive than a tricycle, which is not a cheap machine, but because of the numbers required; there are many thousands of people who would qualify under our present rules of eligibility who have not applied for a tricycle but who would certainly be expected to ask for a car."—[OFFICIAL, REPORT, 15th February, 1967; Vol. 741, c. 524.]
In other words, I believe that there are about 100,000 people who are entitled to these cars, but only about one in four —that is 25,000—actually apply for them because they think the tricycle is not really worth having. I know that my party, when in power, gave the same answer. I should like the Minister to look at this again because it is trading on the unsuitability of the tricycle and, because the tricycle is in existence, it is thought that we save the country money. This is not good enough, and I hope the Parliamentary Secretary will get away from the attitude of the mechanical bath-chair which is what the tricycle really is.
Another suggestion I should like to make is that the Minister should look at the question of war pensioners who are entitled to these four-wheeled vehicles. I question whether at this stage, so many years after the war, the distinction is still valid. I know that the Parliamentary Secretary was in the Royal Artillery during the war. I myself was parachuting. We had our moments and some heroics at the end of the war, but this soon died. I believe that many ex-Servicemen themselves would be happy to see equality of treatment and would


prefer the four-wheeler to be given according to the need of a case rather than according to whether an applicant is a war pensioner or not.
The Parliamentary Secretary will probably agree that those most in need should get the vehicles free and that those who can afford to pay should do so. But there is a group in between who can pay half the cost, and I believe that the Ministry should make some contribution when a person is prepared to pay a part of it himself. High on the list of those whom I should like to see qualify are the haemophilics. Their numbers are very small and the medical advice outside the Ministry of Health is strongly in favour of the haemophilics being entitled to four-wheeled cars. There are other cases, such as the disabled mother with children but whose husband has left her. If the Minister could say whether they are entitled or not, I would be grateful.
My final suggestion is one which I have pressed before, namely, that these people should have tax relief on the petrol they use. They have relief up to a point, but since they last had an adjustment of their tax relief there has been the extra surcharge after Suez and, with devaluation, the price may go up again. Could the hon. Gentleman speak to the Chancellor of the Exchequer to ensure that the tax relief gets back to normal?
I know that the Minister is as sympathetic as I am, but I feel that we must all join together to fight the Treasury to get the money, and anything that I can do to help I certainly will. The Parliamentary Secretary and I, and all in this Chamber, are the fortunate people. We are mobile. But these other people have a grave disability for the rest of their lives, and we must all do what we can to help them.

10.29 p.m.

Mr. William Baxter: We are all grateful to the hon. Member for Banbury (Mr. Marten) for raising this subject and for putting so lucidly a point of view to which I subscribe 100 per cent. It would be wrong of me to reiterate what the hon. Gentleman has said, but I certainly think that pressure should be brought upon the

Government to do everything they can for these unfortunate people.
We are happy to know that the ex-Serviceman gets preference at the moment, but I think it is true to say that most of us would like this preference to extend to industrially injured people. I was interested to hear the hon. Gentleman speak of the dangers involved when these vehicles are driven for long distances alone. I have a constituent whose name is Kennedy and who has been in correspondence with me recently. He has to travel 9½ miles at half-past six on a winter's morning to work. He is dead scared about this.
What happens if there is a breakdown, or anything else goes wrong? He has a wife and an adopted child, but he cannot take them in his vehicle. He would like to adopt another child, but he has only a three-wheeler and is not permitted to take anyone in it. He would be prepared to pay the difference in cost, but the Ministry says that that cannot be done, because of the difficulties to be overcome. I do not see any insurmountable difficulty in getting an agreement about who owns a four-wheeled vehicle. These matters should have the serious consideration of the Minister.
I see no reason why we should not have an all-party committee to press the Chancellor on this matter. I tried to intervene in the debate this afternoon to ask whether money from the Selective Employment Tax could be used for this purpose. It would not be a bad thing to use that tax, which is no longer to be used to help the export industries, for this purpose. The cost would be about £30 million and the S.E.T. would provide considerably more than that. Time does not permit me to give further details, but I hope that my hon. Friend will assist us to press the Chancellor to make this concession.

10.31 p.m.

Mr. John Wells: Because of the potential near mass production of even invalid four-wheeled vehicles, four-wheeled vehicles could be much cheaper than three-wheelers whose production is spasmodic, and the usefulness to a family would be very much greater.
I hope that the Parliamentary Secretary will look into the specific case about


which I have recently written of a person who is not entitled to a four-wheeled vehicle because her prospective passenger is not a blood relation. It seems absurd that two aged people, one an invalid, who have lived together for years should find the rule operating against them because they are not blood relations. Clearly, I do not expect an answer about that tonight, but it is a most important matter.
I also hope that the Minister, when considering four-wheeled vehicles, will closely consider the case of a constituent of mine, Mrs. Male, who some years ago had an Austin minivan specially converted to take a wheel chair. This case was widely written up in the motoring papers. It is a comparatively inexpensive conversion. Could such conversions be made standard Ministry products, giving two front seats for a driver and passenger, which would enable the wife to drive and a child to be a passenger, while the wheel-chaired member of the family could go into the back which would have caravan windows and a caravan-style windscreen?
I believe that the British Motor Corporation, or one of its agents, has done this conversion which is comparatively inexpensive and which made my constituent and her family much more mobile and which could be made available to other people.

10.33 p.m.

The Parliamentary Secretary to the Ministry of Health (Mr. Julian Snow): I cannot express a view tonight about the two specific cases mentioned by the hon. Member for Maidstone (Mr. John Wells), but I undertake to look at the files again. That is all I can say at the moment.
I thank the hon. Member for Banbury (Mr. Marten) for raising this subject tonight with modesty and moderation. I could hardly find a word with which to disagree. Indeed, looking back this afternoon at some old HANSARDS I found that I made precisely the same points some 11 years ago, when I was on the back benches. The hon. Gentleman will accept that my right hon. Friend and I share his continual interest in this important matter.
The hon. Member made two particular criticisms. First, he called into question

the design of the three-wheelers, and, secondly, he made a plea for an increased number of cars instead of three-wheelers to be allotted. When my right hon. Friend made his statement on 15th February last, although he did not at the time have specific legislative powers, he announced that he would supply motor cars to three more groups. This of course includes the disabled mother who is widowed or permanently left to care alone for a young child—

Mr. Marten: Or whose husband has left her?

Mr. Snow: I think that divorce is included, but I will confirm that and let the hon. Gentleman know.
We have now taken powers. This afternoon there was tabled the new Health Services and Public Health Bill, one Clause of which gives my right hon. Friend legislative powers, when he has resources available, to introduce further categories entitled to cars. We first of all await Parliamentary authority for the Bill, and when we have it we shall try to provide these additional vehicles as resources permit. We have explained many times that the important thing is not the comparative cost between a three-wheeler and a car, but the cost which would be involved in satisfying the substantial additional volume of applications from those who have not applied for a three wheeler.
I assure the hon. Gentleman that it is not a question of their having no time for a three-wheeler. Certain categories of disabled have to have a three-wheeler but, in different circumstances, they might be able to use a car with a nominated driver. We must take into account all these considerations. Likewise, the claims of haemophiliac drivers are important, but I would not mislead the hon. Gentleman by saying that they are right at the top of the demand for increased provision of four-wheeler cars. They are important, but not the only important category.
We have paid much attention to the development of these vehicles in the last three years. They are specially designed and constructed. The three-wheeler is often criticised but it should be remembered that this country does more for its


disabled in this respect than any other. No other country offers vehicles for so many of its disabled citizens with so few limitations on their issue or with such a range of associated benefits like free servicing and repair, free insurance and replacement.
There are 17,300 three-wheeler vehicles on issue and we have a reserve stock of 2,211 for replacement in case of break down. There is a substantial reserve, which the public should know about. Income Tax and other possible consequences of devaluation are matters for the Chancellor, whose attention will, of course, be drawn to this debate.
It is important to understand that, while critics sometimes make rude remarks about the design, many criticisms are due to misapprehension of the vehicle's function. To a great extent, the three-wheelers which we provide are capable of a great deal of modification for the many permutations and combinations of disablement. The fuel consumption is very low compared to a car, which is important to those on low incomes.
The hon. Gentleman pressed me to try these vehicles for myself and I take kindly his remarks, although my stature might, perhaps, be a slight disadvantage. However, before he tabled this Motion I had arranged to visit Blackpool, which I shall do in a few days, where I shall do my best to try out these vehicles. When he says that they are difficult in some cases to drive and that some disabled people have bumps in them, this is true, but we do not try to equate the technique for driving a car with that for driving some of these disabled persons' vehicles. They are entirely different, for which reason we provide free courses of driving tuition, and there are very few who find it difficult after being properly instructed.
The hon. Gentleman has mentioned the weight of the three-wheeler among other safety factors. This has been restricted so as to reduce the force required to operate its controls, and the controls have been specially designed for operation by disabled people. The tiller method of steering, which comes in for a lot of criticism, has been found to offer the best method of gripping controls so as to make them accessible to someone with limited movements.
It is an ugly brute of a system, but we think t hat it is the only way of dealing

with the problem of bringing together the controls for someone with limited movement. The use of a single front wheel enables the steering to be much lighter than it would be on a four-wheeled vehicle and the effect of going over a bump in the road is not substantially different from that experienced in a small car.
The higher body is necessary so that those with useless or very stiff legs may get in and out of the driving seat and be seated satisfactorily in the driving position. Tests have proved that three-wheeled vehicles compare favourably with the Ministry of Transport requirements for public service vehicles for the tilting factor. Our three-wheeler model most generally supplied is less likely to topple over than a double-decker bus. This is a demonstrable fact.
The braking system too has been mentioned. The Ministry of Transport has laid down that the service brakes on a three-wheeled vehicle should exert a force of 40 per cent. gravity, and be at least comparable with the accepted standards of safety of normal vehicles. Before 1966 the braking system on our vehicles operated on two wheels and achieved a maximum of 54 per cent. gravity. This met the statutory requirement with something to spare. Last year we improved on that and in the new system we get 75 per cent. gravity. Free servicing and repair arrangements are readily available to maintain efficiency.
The hon. Gentleman spoke about improvements that were needed. We have included in our new models a heating system, lateral sliding seats, sliding doors and glass fibre framework, among other things. Subject to the satisfactory conclusion of tests we intend to introduce automatic transmission which will be a very great advantage.
The hon. Gentleman mentioned forming an all-party group to deal with this problem. He would agree that we are beset with a multiplicity of committees, not only on this subject, but on practically every subject discussed in the House. I would draw his attention to the Joint Committee on Mobility for the Disabled, representing 22 organisations, concerned with the mobility problems of the disabled.
This organisation might be one for which there may be attraction for hon.
Members. If the hon. Gentleman would like it, I would be happy to suggest to the organisations concerned that they might contact Members who are interested. Within the Department we have a service for following up technical and service requirements. We receive advice from all these organisations, and this is considered to be part of the routine work of the Ministry's own scientific and technical services of its supply division. We should use the organisations that exist to avoid a multiplicity of services.
Hon. Members can play a very useful part not only on the technical side, but on the financing side, and in equating the interest of the disabled person, whether industry disabled, accident or war disabled. Both the hon. Gentleman and I can say that we do not think that the disabled war pensioner should have a complete priority in this.

Question put and agreed to.

Adjourned accordingly at sixteen minutes to Eleven o'clock.